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Dispelling Some Myths and Rumors About Gold
By Alan Herbert, Coins Magazine
September 06, 2012

This article was originally printed in Coins Magazine.
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Currently gold is a very hot topic and is often the subject of heated debates. This month I’ve connected a number of loose threads that may allay some of the myths and rumors surrounding the yellow metal.

Never been worth zero? Baloney! How much value did it have lying unnoticed in a stream bed in 1000 BCE? Or, maybe 2000?

A reader asks: When did they start storing our gold at Ft. Knox, Ky.?

The Ft. Knox Gold Depository was constructed in 1935-36. The contract for the construction was awarded Oct. 10, 1935. The first shipments of gold from New York and Philadelphia left on the evening of Jan. 10, 1937, but the facility was not actually completed until Jan. 13.

Some 50 armored trains traveled only at night, and the first phase of the transfer of the gold was completed by June with $5.5 billion in gold moved.

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The high security surrounding the trains effectively deterred any thought of robbing them, but two of the trains were stalled for a time by flood waters that left 400,000 people homeless in the Ohio River valley.

Some years ago there was a rumor that much of the gold stored at Ft. Knox had been secretly sold. Who was responsible for the claim?

Dr. Peter David Beter made the claim in a national “scandal” weekly, precipitating a congressional investigation, culminated by a visit by members of Congress and the press to Ft. Knox on Sept. 23, 1974. Beter was a lawyer, and author of several books on monetary subjects. His claims proved to be completely unfounded, and were considered to be a publicity stunt to promote sales of his books. Beter claimed the gold had been secretly siphoned off to pay off foreign speculators.

Guess how much gold was there per capita before it was called in, in 1933?

Perhaps not as much as you might think. According to U.S. Treasury statistics, there were just over $7 per person in Gold Certificates and slightly over $3 in gold coin and bullion for each person in the United States. At the time there were about 125 million people in the United States. This compared with nearly $21 per person in Federal Reserve Notes and another $5 of National Bank Notes.

Hawaii was once the richest country in the world. How could that be?

Someone once said, “Statistics can prove anything.” This seems to be a case in point. Just before the turn of the century (1900), the official estimate of the gold stock in Hawaii was $4 million. With the population at that time estimated at 100,000, this gave a per capita figure of $40, which was, and probably still is, the largest per capita amount of gold for a country that has been reported.

The process of dredging for gold—using a dredge on an artificial pond—was first used in California. Wrong. Thirty years before the first such dredge appeared on a California stream in 1895, the process was first used in the New Zealand gold fields in 1865. California is associated with dredging because so much gold was recovered in the state by that method.

The U.S. Government didn’t institute gold restrictions before the famous 1933 date? Wrong again. One that escapes many historians is the curtailment of gold coin production and of payments in gold in 1917, during World War I. The government feared that otherwise our gold reserves would be depleted by the war, leaving nothing to back our paper money. As it turned out, we did such a brisk war material business with the Allies that gold reserves by the end of the war had reached the $3 billion mark, and in the next several years added another $1.25 billion.

Perhaps you have wondered why were so many gold coins struck in the United States between 1922 and 1928?

Rather curiously it had nothing to do with any demand or need for gold coins in this country. The demand instead came from other countries of the world. The U.S. currency was one of the strongest in the world following World War I, so even the Germans wanted U.S. gold to back their currency. Collectors can be thankful that they did, because the bulk of the U.S. gold coinage was in foreign bank vaults when President Roosevelt prohibited private gold ownership in 1933. Once the ban was lifted, the gold came back to the United States.

Did anyone ever try to corner the gold market in the U.S.?

Jay Gould tried it in 1869? The Treasury responded to the threat and dumped $5 million in gold on the market to end the danger of financial collapse.

And no, I don’t give investment advice.



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