Throughout history, gold is the precious metal most commonly used as paper currency backing. As it is known, the Gold Standard provided countries with tangible assets for finance and trade. While that standard has diminished, and economic strength and viability now rely on multiple factors, the strength of gold as a commodity remains true.
As such, nations from all over the world constantly buy, sell, and trade gold bullion. However, where is all of it stored? While some countries prefer to keep their gold bullion on their shores, the most common location of the world’s gold is the Federal Reserve Bank in New York City.
This financial institution is a modern marvel of asset protection, as sovereign nations are the only ones allowed to use its services. Private industry is not permitted to store gold bars on these premises. At its height, the Federal Reserve Bank housed 12,000 tons of gold bullion.
Though this amount has decreased over time, it remains the single largest depository of gold bars in the world.
Nations began choosing to use this bank as the primary location for gold storage both during and post-World War II. The reserve provided a safe place for sovereign nations to store their gold stockpiles while also making the trade, purchase, and selling of gold much easier having it in one location. This reserve eliminated the dangers of shipping large amounts over vast distances.
Once deposited, gold bars are taken from the bank’s entrance at street level to their large basement vault eighty feet below. This vault sits fifty feet below sea level on the Manhattan bedrock. This location provides a secure foundation for the weight of their massive gold deposit. While many nations have their vaults at this location, smaller holdings go into a smaller section of the facility known as the “library.”
A committee of three individuals oversees gold deposits into the vault. Two are employees of the Federal Reserve Bank of New York, and the other from the New York Internal Audit agency. The safety and protection of the gold assets are meticulous; these individuals are present even during minor building maintenance activities such as changing a lightbulb.
Each gold bar gets inspected, weighed, and recorded into the Federal Bank records. The purity of every bar is analyzed to guarantee they match depositor instructions. This step is vital as the gold bars are never passed between nations as the asset is considered non-fungible.
This process means any gold bar deposited will be the bar given for a withdrawal.
Once the purity of each gold bar is verified, it moves into one of 122 separate vaults. A single entity owns each vault, which is usually a single sovereign nation. This move is to avoid any commingling between various account holders. As mentioned, a “library” holds smaller accounts, which is a vault with individually numbered spaces on shelves to contain smaller volumes of gold bullion.
The security of these vaults is unmatched. A 90-ton steel cylinder protects the only entryway into the vault. A 140-ton steel-concrete frame supports the cylinder and is air and water-tight when closed. Further, once the door closes, four steel rods slide within the cylinder that engages a time clock that cannot open until the following business day.
Security measures continue with impenetrable steel-reinforced concrete walls surrounding the vault, perpetual surveillance for both inside and outside the vault, and state-of-art motion sensors when the vault door closes. A highly trained security team monitors the vault twenty-four hours a day, seven days a week, providing an additional layer of asset protection.
Each space has a padlock, two combination locks, and the seal of an auditor. Further, storage vault designation is by number as opposed to the account holder’s name. This procedure protects the anonymity of the account holder. The Federal Reserve does not charge for storing gold bars but requires a fee for any transfers. These refer to deposits, withdrawals, or transfers within the bank itself.
In addition, the bank employs another security team comprised of an armed and highly trained Federal Reserve Police force. This force combines with an additional layer of advanced technology-based security measures to provide the ultimate asset protection for the world’s largest gold depository.
The value of gold bars varies based on numerous factors. Firstly, the chemical composition of these bars is not entirely gold. This element in its natural state is too malleable and would not hold its shape. For this reason, gold mixes with small percentages of platinum, silver, or copper that provide stability. The use of these elements in the gold alloy gives the bars a unique color hue.
Gold bars are not uniform in their construction. Depending on the cast, each has its shape and size. Before 1986, gold bars cast in the United States were rectangular. Now, they comply with international standards that see them cast in a trapezoidal shape. Adherence to this standard creates greater uniformity in each bar.
Before 1986, the shape of the gold bar indicated the origin of its cast. For example, gold bars cast in the Denver Assay Office had a rounder shape. Bars cast from the San Francisco office do not have sharp corners, and bars from the New York Assay had more square edges. Each bar cast contains marking that indicates its cast origin and its purity.
How a sovereign nation gives value to its currency has changed over the years. Gold was once the absolute standard for a currency backing commodity; that standard has shifted to include other contributors. Regardless, gold is a failsafe for economic calamity. As such, nations continually buy and sell gold as necessary to uphold their economies.
The United States is by far the largest holder of gold bullion in the world. The amount the U.S. holds is more than the following three country’s gold reserves combined. These countries are Germany, Italy, and France. See the list below for the five countries in the world with the largest gold reserves.
Coming in at a staggering 8,133.5 tons, the United States is the single largest gold bullion holder globally. Containing more gold than the following three countries on the list combined, most of the nation’s gold remains at Ft. Knox. From what is known, the United States gold holding spreads out over a few depositories. The holdings are in the Philadelphia and Denver Mints, the San Francisco Assay Office, and the West Point Bullion Depository.
Next on the list is Germany, with 3,362.4 tons of gold. In 2013, the nation embarked on a repatriation effort to move a large sum of their gold back to Germany from the Federal Reserve Bank of New York and the Banque de France. This four-year effort concluded in 2017, three years ahead of schedule.
The Italian government has maintained its reserves through a myriad of economic rise and fall. The country’s priority to keep its gold reserve despite adverse financial conditions acts as a protection against the fluctuating value of the dollar, and its global value has driven markets across the globe since the 1940s.
This nation has kept the majority of its gold reserves for quite some time. The former French President Charles de Gaulle, who acted against the Bretton Wood system, led then U.S. president Richard Nixon to take the United States off the gold standard. De Gaulle’s move against the system ended the United States dollar’s ability to be directly converted to gold.
Rounding out the top five list with 2,295.4 tons of gold is the nation of Russia. This country overtook China, as of 2018, as the fifth-largest holder of gold reserves in the world. This conversion was due to diversifying their portfolio away from the U.S dollar as tensions between the two nations intensified. The cause was the Crimean Peninsula’s annexation, which forced Russia to sell a large percentage of its U.S. Treasuries.
While the measure of a nation’s economic strength does not entirely align with the amount of gold in its reserves, its role is unquestionable to its economic stability. As it continues for centuries as a preference for exchange, gold remains a vital component of the global financial system. Fortunately, security measures validate its importance to these nations and the banks that hold it.
Extraordinarily, the Federal Reserve Bank of New York is they conduct tours of their facility. This free tour allows visitors to learn about the role and responsibilities of the Federal Reserve Bank firsthand. Unfortunately, they are currently not conducting tours at this time, most likely due to Covid restrictions.
For information regarding investing in gold and precious metals, contact the Oxford Gold Group today! Our expert staff will assist you with all of your investment questions and concerns while providing unparalleled education on precious metal investing. Call today and let us tell you about our unmatched Gold and Silver IRAs!
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