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The intent and context of this question relates to what could possibly cause a huge crash in gold prices in the future.

From a layman's perspective, if tonnes of gold are found in a mine somewhere - that would obviously bring prices down. Let us just assign a lesser probability to that.

Aside from that, does the USA have a 'strategic' gold reserve from which it could release the metal effectively getting the prices down and boosting the dollar?

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    This raises a better question. Why are they still sitting on that gold that has no obvious purpose? By my math there is $450B worth of gold in there doing nothing while we desperately try to balance the budget. – JohnFx Aug 24 '11 at 21:46
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    @johnfx - why not turn this into full reply? I'm curious what the government has in their reserves. – JoeTaxpayer Aug 24 '11 at 22:13
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    @JohnFx - The US Government holds on to gold because it has value. It is a reserve for a day when something is needed (as opposed to desired or wanted) that can not be purchased with dollars, or other assets. Gold has and presumably always will have value. It is not held as an investment but as a strategic reserve that can be leveraged in times of need. As for balancing the budget. If we could get the total cash value of gold today (around 1900 an ounce) for all of the boullion in the vault we would have about 2.7 trillion dollars... So it would not cover our debt or even get close. – user4127 Aug 25 '11 at 13:58
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The US does have a gold reserve. The main reserves are held at Fort Knox but there is even more gold, mostly owned by other countries, stored in the basement of the New York Federal Reserve Bank (Think Die Hard 3).

The United States Bullion Depository, often known as Fort Knox, is a fortified vault building located adjacent to Fort Knox, Kentucky, used to store a large portion of United States official gold reserves and occasionally other precious items belonging or entrusted to the federal government.

The United States Bullion Depository holds 4,578 metric tons (5046 tons) of gold bullion (147.2 million oz. troy). This is roughly 2.5% of all the gold ever refined throughout human history. Even so, the depository is second in the United States to the Federal Reserve Bank of New York's underground vault in Manhattan, which holds 7,000 metric tons (7716 tons) of gold bullion (225.1 million oz. troy), some of it in trust for foreign nations, central banks and official international organizations.

Source: Wikipedia

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According to the US Mint, the Government does still have a gold reserve stored mostly in Fort Knox in Kentucky, but there is some in New York and Colorado too.

Some facts from their site:

  • Amount of present gold holdings: 147.3 million ounces.
  • The only gold removed has been very small quantities used to test the purity of gold during regularly scheduled audits. Except for these samples, no gold has been transferred to or from the Depository for many years.
  • The gold is held as an asset of the United States at book value of $42.22 per ounce.
  • The Depository is a classified facility. No visitors are permitted, and no exceptions are made.

That last point is an interesting one. They are basically saying, yes we have it, and no you can't see it. Some conspiracy buffs claim no one has been allowed in there to audit how much they have in over 50 years leading them to speculate that they are bluffing.

Although the dollar is no longer tied to the gold standard, throwing that much gold into the market would definitely add fuel the volatility of the finance world, which already has it's share of volatility and isn't hungry for more.The impact on the price of the dollar would be quite complicated and hard to predict.

  • Members of congress have been told that there have been no audits of the amount of gold in the vault in 50 years. They audit the quality of the gold in the vault but not the quantity of that gold. That said the facility is classified but not top secret. Had the gold been removed enmass or even in a signifigant amount It could not have been realistically covered up. I would concede it is possible for a few pounds(>100) to go missing over time but any large amount would have been noticed. And that 100 pounds while valuable would be theft not grand conspiracy. – user4127 Aug 25 '11 at 14:04
  • Just to be clear. I didn't mean to imply that I believe the gold isn't there. Just thought it was an interesting side note that there are some who do. – JohnFx Aug 25 '11 at 14:53
  • Without trying to get to chatty on this side note... The point of forcing the audit requires those incharge to admit that they are not worthy of our trust. Refusing to do the audit looks like you are trying to hide something. It is a political game not an actual challenge to the existance of gold. But yes there is a fringe that latches on to refusal as an admission of consiracy. – user4127 Aug 25 '11 at 15:02
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The United States is no longer on a gold standard, and the value of its currency is solely founded on the productivity of its economy. So I don't think there's any practical reason for the United States government to explicitly sell off a lot of gold to force the price to crash. In fact I would expect that the price of gold has very little interest for the Fed, or anyone else in a position of economic power in the government.

I believe that we still have large reserves of it, but I have no idea what they are intended for, aside from being a relic of the gold standard. Best guess is that they'll be held on to just in case of an international trend back towards the gold standard, although that is unlikely on any time frame we would care about.

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