Treasury audits NY Fed's gold but only to evade leasing, swapping, oversubscription issues

Section:

10:11a ET Friday, August 3, 2012

Dear Friend of GATA and Gold:

The Los Angeles Times reported yesterday that the U.S. Treasury Department is "auditing" the gold vaulted at the Federal Reserve Bank of New York, most of which is held in custody for other countries, but only to the extent of confirming the gold content of the bars kept there, and not touching on issues of ownership impairment, like swapping and leasing, the issues raised by GATA and others aggrieved by manipulation of the gold market.

Indeed, the "audit" seems intended to dispel "conspiracy theories" without actually having to disclose anything about the U.S. government's gold market intervention policy, the issue at the heart of GATA's freedom-of-information lawsuit against the Fed in U.S. District Court for the District of Columbia, a lawsuit that was decided more or less in GATA's favor last year and revealed that the Fed has secret gold swap arrangements with foreign banks as well as many other gold-related records that are being kept secret:

http://www.gata.org/node/9917

Responding to the L.A. Times story, Zero Hedge quickly explained why the Treasury's "audit" of the New York Fed's gold is a fraud. "What the 'conspiracy theorists' allege," Zero Hedge notes, "is that claims existing in paper format on the physical gold held under Liberty 33 are orders of magnitude greater than the actual physical gold these claims supposedly have recourse to":

http://www.zerohedge.com/news/feds-gold-being-audited-us-treasury

But the L.A. Times story does quote U.S. Rep. Ron Paul on that point and even mentions the movement in Germany to repatriate that nation's gold reserves from foreign vaults. And if the Treasury Department has felt compelled to commission exactly the wrong kind of audit to deflect rising concerns about gold issues, that's progress too.

The L.A. Times story is appended.

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

* * *

What's in Your Vault? Uncle Sam Audits Its Stash of Gold at the New York Fed

The gold audit is a first for the institution and includes drilling into several hundred ingots. It could put the conspiracy theories to rest.

By Andrew Tangel
Los Angeles Times
Thursday, August 2, 2012

http://www.latimes.com/business/la-fi-gold-bars-20120803,0,3466318.story

NEW YORK -- For decades, the U.S. government has stashed gold five stories beneath Manhattan in a vault under the Federal Reserve's fortress near Wall Street.

Or has it?

Some conspiracy theorists suspect that the billions of dollars' worth of bullion might have been looted in a dramatic heist, a la the movie "Die Hard With a Vengeance."

Others claim that the gold has been used in a shadowy government transaction, or swapped with gold-painted bars. It's even caught the attention of politicians like Rep. Ron Paul and members of Germany's Parliament.

Now all of us may finally get some answers.

The federal government has quietly been completing an audit of U.S. gold stored at the New York Fed. The effort included drilling small holes in the bars to test their purity.

The Treasury Department has refused to disclose what the audit has revealed so far, saying the results will be announced by year's end. But as one former top Fed official said recently, the testing may finally prove that "Goldfinger didn't sneak in at night" and take the gold.

... Dispatch continues below ...



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Sona Discovers Potential High-Grade Gold Mineralization
at Blackdome in British Columbia -- 13.6g over 1.5 Meters

From a Company Press Release
November 22, 2011

VANCOUVER, British Columbia -- With its latest surface diamond drilling program at its 100-percent-owned, formerly producing Blackdome gold mine in southern British Columbia, Sona Resources Corp. has discovered a potentially high-grade gold-mineralized area, with one hole intersecting 13.6 grams of gold in 1.5 meters of core drilling.

"We intersected a promising new mineralized zone, and we feel optimistic about the assay results," says Sona's president and CEO, John P. Thompson. "We have undertaken an aggressive exploration program that has tested a number of target zones. Our discovery of this new gold-bearing structure is significant, and it represents a positive development for the company."

Sona aims to bring its permitted Blackdome mill back into production over the next year and a half, at a rate of 200 tonnes per day, with feed from the formerly producing Blackdome mine and the nearby Elizabeth gold deposit property. A positive preliminary economic assessment by Micon International Ltd., based on a gold price of $950 per ounce over eight years, has estimated a cash cost of $208 per tonne milled, or $686 per gold ounce recovered.

For the company's complete press release, please visit:

http://www.sonaresources.com/_resources/news/SONA_NR18_2011-opt.pdf



"The calls for audits are saying, 'We don't trust the government for the last 200 years,'" said Ted Truman, a former assistant Treasury secretary and Fed official. He called perennial questions about the country's reserves "the gold bug equivalent of the birther movement."

The Treasury's auditing operation, including drilling, is a first for the New York Fed. The department's inspector general previously audited and tested only gold it keeps under heavy guard at Fort Knox, West Point, and the U.S. Mint in Denver. These three locations hold 95% of the country's bullion.

In New York, about $21 billion in U.S. gold is locked inside the Fed's vault. It's stored alongside bullion from three dozen other countries and organizations such as the International Monetary Fund. All told, about 23% of the world's official gold reserves are stored in the central bank's vaults.

The audit, which began in January, took place 80 feet below the Fed's limestone and sandstone Italian Renaissance building in Manhattan's financial district. Visitors to the vault make their way through a steel and concrete entrance where a 90-ton door rotates open.

Inside, a massive scale is ringed by 122 blue cages that hold about 530,000 gold bars -- 34,021 of which belong to Uncle Sam. The auditing team counted the U.S. stash, selecting more than 350 bars from which to extract samples for assaying.

The process involved about half a dozen employees of the Mint, the Treasury inspector general's office and the New York Fed. It was monitored by employees of the Government Accountability Office, Congress' investigative arm.

The bars were first weighed on a small electronic scale, then transferred to a table mounted with a long, thin drill used to burrow into the gold, said a person familiar with the operation who was not authorized to speak publicly.

Workers were careful to collect any stray gold bits, the source said. Based on the market price of about $1,600 per troy ounce, the Treasury removed more than $110,000 worth of gold samples.

A Mint spokesman said about 1 to 1.5 grams of each sample is destroyed in the assaying process, with the remaining granules returned to the government.

The New York Fed refused to comment.

The final results still might not satisfy some. Paul, the Texas Republican and presidential contender, wants an independent audit of all U.S. gold.

In 1981, when Paul was on the Gold Commission -- a panel set up by Congress to explore expanding gold's role in the U.S. monetary system -- he argued for full gold audits every year. He has pitched legislation for an exhaustive examination of the country's gold that could cost as much as $60 million.

"If the gold is there and everything is in order, they should welcome an audit," Paul said in an interview.

He said he doesn't suspect that anyone has replaced the gold bars with fakes. He's more interested in examining paperwork that would show whether the gold has been used in any transactions that were never disclosed to the public, such as loans to other governments.

He is not alone. In Germany, there have been calls by some politicians to "repatriate" the country's foreign gold reserves and return to a gold standard as the euro common currency faces an uncertain future.

Germany owns the world's second-largest reserve of gold, much of it stored in central banks in New York, London and Paris. The German government keeps close tabs on its domestic gold reserves, but some in Germany are questioning the security and safety of the bullion stored outside the country.

They've launched a campaign called Gold Action, supported by politicians, economists, and other German citizens, with the goal of bringing the bars back home.

Philipp Missfelder, a prominent German legislator in the country's ruling Christian Democratic Union party, visited the New York Fed in February seeking to inspect his country's gold.

Missfelder was not given access to Germany's gold bars, though it's unclear why, according to German magazine Der Spiegel. He declined to comment.

The New York Fed hasn't typically rolled out the red carpet to the central banks and international organizations wanting to audit their gold accounts, according to Ernest Patrikis. He's a former New York Fed official who had stints as the institution's general counsel and chief operating officer.

"They could come in and take a look," said Patrikis, now an attorney in private practice in New York. But if they wanted to count the gold, "you've got to take it away, count it and bring it back."

America's central bank began taking foreign gold deposits when it opened in 1924. Gold piled into the New York Fed's vault during World War II, as countries stored it there for safety. Foreign reserves quadrupled to $4 billion worth of gold by the war's end, according to the Fed.

The gold vault swelled with bullion until 1971, when the U.S. stopped backing dollars with gold. Since then, the Fed role as keeper of the yellow metal now carries less significance.

These days the New York Fed focuses on more pressing roles: implementing the country's monetary policy by expanding or tightening the money supply. It played a central role in propping up the financial system in 2008.

Paul suggests that the government offload its gold reserves if they serve little purpose.

"I would just as soon they sell the gold," Paul said. "And then we would find out if they really had it."

* * *

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Prophecy Platinum Announces Wellgreen Preliminary Economic Assessment:
38% Pre-Tax IRR, $3.0 Billion NPV, and a 37-Year Mine Life

Company Press Release

VANCOUVER, British Columbia, Canada -- Prophecy Platinum Corp. (TSX-V: NKL, OTC-QX: PNIKF, Frankfurt: P94P) reports the results of an independent NI 43-101-compliant preliminary economic assessment for its fully owned Wellgreen nickel-copper-platinum group metals project in the Yukon Territory.

The independent assessment, prepared by Tetra Tech, evaluated a base case of an open-pit mine (with a mining rate of 111,500 tonnes per day), an on-site concentrator (with a milling rate of 32,000 tonnes per day), and an initial capital cost of $863 million. The project is expected to produce (in concentrate) 1.959 billion pounds of nickel, 2.058 billion pounds of copper, and 7.119 million ounces of platinum, palladium, and gold during a mine life of 37 years with an average strip ratio of 2.57.

The financial highlights of the preliminary economic assessment, shown in U.S. dollars, are as follows:

Payback period: 3.55 years
Initial capital investment: $863 million
IRR pre-tax (100% equity): 38 percent
NPV pre-tax (8% discount): $3 billion
Mine life: 37 years
Total mill feed: 405.3 million tonnes
Mill throughput: 32,000 tonnes per day

Prophecy Chairman John Lee says: "We are pleased with the preliminary economic assessment results. The numbers indicate that Wellgreen is one of most exciting mineral projects in the Yukon. The company is drilling to upgrade and expand the resource base. The infrastructure is excellent as the project is only 1,400 meters in altitude and 14 kilometers from the paved Alaska Highway, which leads to the Haines deep seaport. Discussions are under way with support from local stakeholders regarding permitting and logistics."

For the complete press release, please visit:

http://prophecyplat.com/news_2012_june18_prophecy_platinum_announces_res...