Another exhortation to trade techs for gold

Section:

2a EST Saturday, December 18, 1999

Dear Friend of GATA and Gold:

James Turk, publisher of Freemarket Gold and Money
Report, makes herewith the case for an accounting of
the U.S. gold reserve.

CHRIS POWELL, Secretary
Gold Anti-Trust Action Committee Inc.

* * *

WE HAVE A RIGHT TO KNOW

By James Turk
jamesturk@fgmr.com
December 18, 1999
Copyright 1999 / Freemarket Gold & Money Report.

In the 1970s a very courageous gentleman named Edward
Durrell claimed that substantially all of the US Gold
Reserve being stored at Ft. Knox was gone. Only 1,000
tonnes or so of the 8,500 tonnes supposedly being
stored there remained. The rest had been secretly taken
from Ft. Knox and shipped to London in 1967 and early
1968 for sale by President Johnson in an ill-fated
attempt to keep the price of Gold at $35 per ounce.

Mr. Durrell provided a lot of anecdotal evidence to
support his claim. These included eyewitness accounts
of hundreds of Army trucks leaving Ft. Knox in the
middle of the night over a period of many weeks,
supposedly loaded with the Gold bounty. Other
interesting but circumstantial evidence was the sudden
and unexpected dismissal of Gordon Tether, business
editor for London's Financial Times, who published Mr.
Durrell's claims. To my knowledge, no mainstream US
newspaper dared to publish Mr. Durrell's allegations.

More circumstantial evidence emerged in the late 1970's
when the US Treasury auctioned some Gold in an attempt
to keep the Gold price from rising rapidly. The bullion
banks bidding in the auction received 'coin-melt' bars,
not good delivery bars. The coin-melt bars were
fabricated in the 1930's after the Gold confiscation at
that time. Coins are only 90 percent pure gold, with 10
percent other metals added to provide durability to the
gold so that it can be used as coin without excessive
wear or damage. In contrast, good delivery bars are 99%
pure.

Mr. Durrell alleged that the coin-melt bars were not
taken to London because their source could easily have
been identified, the US being the only country that
seized their citizens' gold. Had the coin-melt bars
been sold, the secret nature of the operation would
have been compromised, so the coin-melt bars remained
at Fort Knox while the good delivery bars were sold in
London in President Johnson's diabolical, unsuccessful
scheme. Subsequent administrations, too afraid of the
consequences from telling the truth, have continued the
cover-up.

Clearly, the above examples are not sufficient to prove
Mr. Durrell's claim, but one piece of evidence does
raise serious questions. He claimed that a proper audit
of the Gold reserve had not been made since the late
1950s during the Eisenhower administration. Moreover,
despite his best efforts to get an audit completed,
including as I recall offers to pay for the audit
himself (which were not hollow promises because he was
a very wealthy businessman), no audit was undertaken.
The reason? The US Treasury said it was unnecessary
"because everyone knew that the Gold was still in Fort
Knox."

The Treasury's curious response always seemed
incredulous to me, so I have remained open-minded about
whether the gold was there or not. After all, we now
know that President Johnson had lied to the nation
about the Gulf of Tonkin incident that dragged the US
into war in Viet Nam, so who is to say that he didn't
also lie about the gold in Fort Knox?

Mr. Durrell passed away at age 90 in the early 1980s.
With his passing, and the decline in inflation and the
gold price from the 1980 highs, over time this
controversy was largely forgotten. I too put it largely
out of mind until the early 1990's when I came to know
a very wealthy industrialist with an interesting story.

I wrote about this gentlemen and his story in April
1994 (FGMR 143, "Thinking the Unthinkable"). He had
requested anonymity, so I only refer to him as Andre,
which is not his real name. Andre provided some
additional interesting details, many of which filled in
some unexplained gaps in Mr. Durrell's allegations.

Earlier in the year I reprinted this article because it
was becoming clear to me that Mr. Durrell's and Andr's
contention that the US Gold reserve was missing helped
explain what was happening in the gold market. As the
huge weight of gold being loaned and borrowed grew
seemingly without end, it appeared to me that the gold
supposedly in Ft. Knox must be part of the equation. So
I asked myself what could I do about it?

My answer was to try getting to the bottom of this
matter for once and for all. And the only way to answer
the question of whether the gold was really in Fort
Knox was to complete an audit. Therefore, on August 30,
1999, I wrote the following letter to US Treasury
Secretary, Lawrence Summers:

"Dear Mr. Summers:

"Re: US Gold Reserve at Fort Knox

"It is my understanding that a proper audit of the US
Gold Reserve at Fort Knox has not been completed since
the Eisenhower administration. I further understand
that some visual inspections have been completed, but
clearly, these can not be considered as a proper audit.
The proper audit of bullion reserves is one undertaken
by independent third parties, and includes among other
safeguards, a review of security procedures and assays
of Gold bars selected at random. I am therefore
concerned that the Gold Reserve at Ft. Knox may be at
risk. My concerns could be alleviated if you would be
kind enough to answer the following questions and
provide me with the following information: 1) Is it
true that a proper audit, as I've explained above, of
the Gold Reserve at Fort Knox has not been completed
since the Eisenhower administration? If it is not true,
please provide me with a copy of the report prepared by
the auditor. 2) Is it true that Treasury Department
policy states that a proper audit will not be
undertaken because the cost of an audit is considered
to be unnecessary? If so, please explain why this
expenditure, even if it were to cost a few million
dollars, is unnecessary in view of the fact that it
would ensure the safety of an asset that not only is of
key importance, but is also worth about $70 billion at
current market prices. 3) If a proper audit of the Gold
Reserve at Fort Know has not been completed for a
number of years, please explain why a proper audit has
not been undertaken, and further, why a proper audit is
not undertaken yearly as is the practice for other
government assets. I look forward to receiving your
response, and I thank you for your assistance. Yours
sincerely, James Turk."

Weeks passed without any reply.

Consequently, I sent the letter again on October 13.
Again, no reply.

On the surface, it would seem that my letter is a very
simple one to answer. Why no reply? Why not even a
letter from Mr. Summers acknowledging receipt? Does he
not want to answer these seemingly very simple
questions?

In any case, I am pursuing the truth. On November 22nd
I wrote to my congressman, John Sununu. I provided him
with my letter to Mr. Summers, and requested that he
contact Mr. Summers in order to see if he could get
answers to my questions.

On December 1 Congressman Sununu responded to me saying
he had sent my letter to Secretary Summers. He also
said that he would send to me Mr. Summers' reply. We'll
see whether or not Mr. Summers ignores my congressman.

Why doesn't the Treasury complete an audit, thereby
putting the rumors to rest? Is the gold in Fort Knox or
not? We have a right to know.