Conspiracy theories are (almost) never true. As we wrote last week, though, sometimes they are – like when a global bank admits that it’s been fiddling with the price of gold, and when China steps up its efforts to take control of the gold market.
So what if some of the more unbelievable gold conspiracies are also true?
Some people think that these recent announcements are just the tip of the iceberg. They think there is a much larger conspiracy by governments – principally the U.S. – to hide the truth about gold. They believe that this conspiracy is covering up a deep weakness in the U.S. dollar, which (possibly) could collapse at any time. A natural hiding place for investors from this gathering storm is gold bullion.
Gold conspiracy theorists also believe China is secretly hoarding gold as part of a scheme to accelerate the U.S. dollar’s decline, and wrestle global financial dominance from the U.S.
Given that conspiracy theorists seemed to be proven at least partially right by recent gold developments, we thought it would be interesting to look at other gold conspiracy theories. If any of these are proven to be true, the ensuing scandal would cause people to lose confidence in the U.S. dollar and cause the price of gold to rise.
Here are three prominent gold conspiracy theories, along with the chances of them coming true:
- Fort Knox actually holds no gold.
Facts: The U.S. government has long reported that its massive top secret Fort Knox vault in the eastern state of Tennessee holds 5,000 tonnes of gold – that’s nearly 3 percent of all the gold ever mined, worth about US$182 billion at current market prices. It’s roughly equivalent to 2.5 times China’s total stated gold reserves.
Located below a U.S. Army facility, the vault was built in 1937 to house U.S. gold reserves, which were at the time used to back the dollar. (The U.S. abandoned the gold standard in 1971.) The vault’s blast-proof door weighs 25 tonnes. Apache attack helicopters circle the skies above the heavily fortified army post and 30,000 soldiers with armoured vehicles are stationed nearby.
What’s suspicious: The last full audit of Fort Knox was conducted in 1953. The site is classified top secret by the U.S. government, and over the past 60 years, only a few people have set foot inside the vault. In 2011, U.S. Congressman Ron Paul called for a new audit of Fort Knox, expressing doubts about its contents. The U.S. government has refused to do so, calling it unnecessary and a waste of tax dollars.
So, the government MUST be hiding something, right? Has the gold been sold off over the years by the U.S. government for nefarious reasons? And if so, where has it gone?
The chances: The probability that there’s no gold in Fort Knox is pretty low. If there was no gold and someone discovered it, the damage to the U.S. dollar and to the credibility of the U.S. government would be enormous. There’s no point in the U.S. taking that sort of risk. So, there’s gold in Fort Knox. The chances that there’s less gold in Fort Knox than has been reported? That’s higher, just because there’s so much uncertainty about the real amount.
- Half of Germany’s total gold reserves were held in safekeeping in New York, but they’ve disappeared.
Facts: The Federal Reserve Bank of New York reportedly holds the world’s largest known depository of gold, some 6,350 tonnes, below its office building in New York City. The New York Fed safeguards the gold for account holders, including the U.S. government and foreign governments.
The vault securing the gold rests on bedrock, 80 feet below the streets of Manhattan. Since WWII, Germany has believed that keeping its gold in New York was safer than keeping it in a place where it could be taken by the (now-former) Soviet Union, if they invaded.
What’s suspicious: In 2013, under pressure from domestic activists, the German government announced it would transfer all of its gold held in vaults around the world back to the homeland. Half of Germany’s gold reserves – reportedly some 1500 tonnes – were held in the U.S. But for some reason, the volume of gold to be sent back to Germany was reduced to 300 tonnes, and was to be returned over the course of five years.
Conspiracy theorists questioned why Germany needed five years to move its gold, when that amount of gold could be flown from New York to Frankfurt in a week using a few C-130 transport planes. Was the gold actually there? Was it illegally lent out, or illegally sold? Could much or all of the German gold held for safekeeping by the U.S. be gone?
The chances: Most of Germany’s gold is probably there. Is some of it not available? Perhaps.
- The 9/11 terrorist attacks were actually the largest gold heist in history.
Facts: Prior to the terrorist attacks, World Trade Center 4, which was next to the collapsed towers, was home to five commodity exchanges, and housed one of the world’s largest trading floors. Seventy feet under the building was a huge vault, which at the time was leased by the Bank of Nova Scotia. The bank reported that weeks after the attacks, all of the contents of the vault were recovered – US$200 million of precious metals.
What’s suspicious: Several reports prior to the attacks listed the gold and silver housed under building 4 as valued at nearly US$1 billion, five times more than the amount the bank said was recovered and accounted for. Is it possible the attacks were not a terrorist plot, but rather an elaborate diversion to hide a US$800 million theft?
The chances: This is the realm of the tinfoil hat people – people who are hard-core conspiracy theorists who don’t let reality or reason interfere.
There’s little evidence that any of these gold conspiracy theories are true. However, scientific research tells us this much about such theories: If you believe one is plausible, you probably feel the same about the rest.
If some, or all, of these theories were true – or partly true – what would it mean? Any of the three would be a big blow to the credibility of the U.S. government, and to the U.S. dollar. And if suddenly there would be less gold that’s accounted for in the world, the price of gold would probably rise. But again, the chances of any of these coming to pass is slim.
In the meantime, there are other good reasons to own gold, as we’ve discussed before. It’s a great way to diversify your portfolio, and it’s a great hedge. And in a world of deflation it’s a good asset to own.
To invest in gold, you can buy gold bars and store them in a safe or safety deposit box. You can also buy an ETF that tracks the price of gold. The biggest in the world is the SPDR Gold Trust that trades on the New York Stock Exchange (ticker: GLD.) You can also buy it on the Singapore Exchange (code: O87.) In Hong Kong, you can buy the Value Gold ETF (code: 3081.) All of these ETFs track gold prices by holding actual gold bullion (or do they…)