The Federal Reserve vault in New York holding half a million gold bars was not always the biggest gold reserve in the world. The history of money traces gold back to 4000 B.C. when it was used to make jewelry. Since then, gold has been used as decoration, but mostly a symbol of power and wealth.
The tombs of Egyptian Pharaohs were packed with gold. Chinese kings were buried with gold-gilded chariots. Of all the 118 elements from the periodic table, we’ve chosen gold to use as currency throughout history. As a handful of fortunate nations have evolved and grown into superpowers, they’ve accumulated an astounding amount of precious metal along the way. Enormous vaults have been built to protect hundreds of billions of dollars worth of gold. Here’s where the gold bars are.
The World Gold Council estimates the value for all gold ever mined would be over $7.5 trillion. That’s more than 5 billion troy ounces of gold. Over most of history, a country’s gold reserves were considered a critical financial asset. It’s been vital for governments to keep their gold stash safe through changes in power, world wars, and the always present risk from professional theft. Let’s look at three of the legendary vaults where a tremendous amount of gold is secured.
New York Federal Gold Vault
The largest amount of gold in one vault is found below the New York Federal Reserve Bank building in Manhattan. At 33 Liberty Street in lower Manhattan in the Financial District in New York City, not far from Wall Street, an amazing gold vault sits underground. Nearly 80 feet below street level, there’s a vault built in bedrock holding assets from central banks worldwide.
Over 7,000 tons of gold bars are stored inside the vault walls. The U.S. Government owns a portion of the gold, but central banks of foreign governments own nearly 98% of the gold. The Federal Reserve Bank of New York serves as a guardian of the gold and stores it at no charge to the account holders. These account holders can only be official international organizations. Individuals are not allowed to store gold at the Federal Reserve Bank vault.
After World War II, the New York Federal Reserve gold vault saw a big jump in deposits from foreign governments. Countries were looking for a safe location to store their gold, and the clear choice was New York City in the United States. Gold holdings increased steadily at the federal reserve gold vault until 1973 when the U.S. suspended convertibility of dollars into gold for foreign countries. Since then, the gold vault has seen a slow decline from its 12,000-ton monetary gold peak. However, it remains the largest accumulation of gold in the world.
The Impenetrable Federal Reserve Vault
The only way into the vault is by a 90-ton steel cylinder entryway, which rotates by turning a giant wheel. Armed guards maintain continuous supervision of the building, but the protection of the largest gold stache in the world goes way beyond physical security. In addition to the massive walls, security cameras cover every inch of the building, with no area left un-monitored. Inside the vault, each compartment is secured by a padlock and two combination locks.
There are countless engineering challenges in constructing a massive gold vault, but one of the most difficult tasks is finding a location that will support the 6,200 tons of gold. The bedrock of Manhattan is one of the few foundations considered adequate to support the weight of the vault. Enormous concrete walls surround the vault, creating a watertight seal because of the location below sea level. The vault floor is actually located five stories below street level.
Inside there are 122 separate smaller vaults, one for each country. Deposits are carefully tracked because gold bars can have significant variations in purity and weight. Once a deposit is made, you can later withdraw the same bar. One surprising fact about the most extensive collection of gold on the planet is that it offers public tours with a tour guide. This is one free tour that I’ll plan to make on my next trip to New York.
What does Monetary Policy have to do with Gold Vaults?
You’ve probably heard the term “monetary policy” tossed around at parties and wondered why the phrase is associated with the Federal Reserve. Monetary policy can have a variety of meanings. Still, it’s mostly how a central bank attempts to influence the price of money and the amount of credit to achieve certain financial objectives.
Supply and demand throughout an economy can be swayed by changes to monetary policy. Federal Reserve Banks play an important role in the economic system by providing financial services to depository institutions such as banks, savings and loans, and credit unions.
So where does the gold come into play?
Just a few decades after the United States’ founding, the financial system was backed by the gold standard. In 1913, the gold standard was built into the framework of the Federal Reserve, which detailed requirements of how much gold the Fed was required to hold. At this time, a law was established stating the Federal Reserve was to hold enough gold to equal 40 percent of the currency is issued.
The obvious next challenge was to design a place to hold this enormous amount of gold. From 1919 to 1924, the Federal Reserve constructed the New York Federal Reserve Bank building with the incredible gold vault inside.
Here’s a great video by National Geographic on the U.S. Federal Reserve with footage on the transportation of gold inside and out of the New York gold vault. Don’t forget your gold vault tour the next time you are visiting Manhattan. Visitors can enter at 44 Maiden Lane for a 1-hour free tour of the vault.
The Bank of England Gold Vault
Over 4,600 tons of gold are protected in the largest gold vault in the United Kingdom. Many of the security measures in place at gold vaults are unpublished and unknown except for a few principal operators. The vault contends there have been no heists since the bank’s establishment in 1694.
With over 400,000 gold bars in the vault, just a small portion of those bars belong to the bank itself. The bank also stores gold for the London Bullion Market Association, the UK government, and other foreign central banks worldwide. A fantastic feat was pulled off when the entire vault was emptied during World War II.
The gold bars were shipped to Canada to protect them from Germany. The vault was used as a staff canteen and later a bomb shelter. Posters sill line the walls from when the vault was emptied during the war effort.
Fort Knox is a United States Army base in Kentucky, but “Fort Knox” is also a descriptive phrase for impenetrable. It has had the reputation of being the most secure and secret places in the world. The fortified vault at Fort Knox is actually called The United States Bullion Depository witch is a separate building located adjacent to the Army Post. Constructed in 1936, the Department of the Treasury operates it. The United States Mint Police protect the building. Rumors surround the fort because of its secrecy and lack of transparency regarding the contents in the vault.
The government says there are 147 million ounces of gold worth roughly $200 billion in today’s prices. Initially, the thought was that Fort Knox would house the gold that was backing the U.S. dollar currency. This all changed when the dollar was taken off the gold standard in 1971.
Some conspiracy theories exist as to whether there’s actually gold in the vault since it’s not backing the dollar currency anymore; why would we need to store it. Some people speculate that the gold was sold off long ago, and the vault now contains tungsten bricks painted to look like gold bars. Few audits to test the gold bars or inventories to count it exist.