Export Over 175 Million Ounces of Gold
By Patrick A. Heller
States Geological Survey (USGS) publishes
monthly Mineral Industry Surveys with one series
that focuses on gold production, imports and
exports. These reports include information from
the U.S. Census Bureau on the quantities of
refined gold bullion and gold compounds exported
from the US.
The latest monthly report is from February 2009,
which includes data for 2008 and early 2009. The
February 2008 report is the oldest of these
reports available at the USGS Web site (www.usgs.gov),
which includes data for all of 2007. For prior
years, there are annual reports that do not lay
out the data in the same format.
In 2008, domestic U.S. gold mine production was
reported at between 228 and 230 metric tons.
Since a metric ton contains 32,151 troy ounces
of gold, that means U.S. mine output was
somewhere between 7.33 million and 7.395 million
troy ounces last year. In 2007, gold mine output
was about 244 tons, or 7.845 million troy
U.S. net exports (gross exports minus imports)
of refined gold were about 10.8 million ounces
in 2008 and 11.2 million ounces in 2007.
The intriguing statistics contained in these two
annual totals is the net exports of gold
compounds. For 2008, there were net exports of
2,818 tons (90.6 million ounces) of gold
compounds. In 2007, the net exports were 1,988
tons (63.9 million ounces).
Rob Kirby of Kirbyanalytics in Toronto contacted
a USGS employee knowledgeable in the preparation
of these reports. This employee told Kirby that
the USGS had contacted the U.S. Census Bureau to
confirm the accuracy and details of gold
According to the Census Bureau, gold compounds
include industrial type products containing low
percentages or amounts of actual gold content,
with gold paint being given as one example.
Kirby mentioned to the USGS employee that the
increase in net exports from 2007 to 2008 did
not make sense given the global economic
downturn. The USGS employee acknowledged that
the figures did not make sense, which was one
reason that the Census Bureau had been contacted
to confirm the data.
Kirby then observed that the high value of such
exports did not make sense if it could include
only industrial goods, given the decline in
global commercial activity. Rather, Kirby
speculated the amount of gold exported indicated
that it was more likely to be gold bullion or
equivalent forms. To this, the USGS employee
responded, "That would be correct."
So, for 2007 and 2008 combined, the U.S.
exported 22 million ounces of refined gold and
over 154 million ounces of "compound gold." This
is more than 11 times U.S. gold mine production
during those two years. In fact, this is higher
than global gold mine output. Where did all this
gold come from?
This amount of gold exceeds what is held by all
private parties in the U.S. combined. When the
U.S. government called in gold in 1933, it then
melted down the coins without refining. As a
result, such bars from the coin melt would have
a purity of around 90 percent gold. These would
not qualify for description as refined gold, but
could fit the definition of compound gold.
In the past few years, several gold traders have
commented that a surprising number of coin melt
gold bars were being delivered in London and
Zurich markets, bars which almost certainly came
from the U.S. Treasury vaults.
It is possible that some of these gold exports
could be the repatriation of foreign central
bank gold that had been stored with the New York
Federal Reserve. Such transfers would be
classified as "exports" for purposes of this
report. The other possibility is that it could
be gold formerly held by the only central bank
in the world that had that much gold - the
Wherever this gold came from, it is bad news for
the U.S. government. If foreign central banks
are pulling their gold reserves out of storage
in the U.S., that signals lost faith in U.S.
financial strength, which the U.S. government
would not want the general public to learn
about. If the U.S. government has actually been
exporting its own gold, while still trying to
pretend that the quantity in its vaults is
unchanged, confirmation of such exports would
clobber faith in both the U.S. government and
The U.S. government has not had a genuine audit
of its gold holdings in decades. In recent
years, it has changed the description of gold
holdings in reports so that now it is only
described as "custodial gold" rather than gold
The so-called experts such as the World Gold
Council, GFMS, and CPM Group do not include the
appearance of all these gold supplies in their
reports on global gold supplies and demand,
which makes their analyses grossly inaccurate.
The U.S. government has a huge interest in
hoping that the general public will not notice
or care where all this gold came from. On the
other side, for their personal financial
protection, Americans urgently need to know the
source of all this gold.
Kirby released his report last Friday. I expect
that it will foster a clamor for disclosure. If
the U.S. government resists providing the
information, people will assume the worst - that
the U.S. government has a lot less gold than it
claims. It would be difficult for the government
to lie about the source of this gold and get
away with it - too many analysts will be double
checking the information. Alternatively, the
U.S. government could honestly admit where the
gold came from, which I am confident will show
much lower gold holdings than reported. No
matter how the U.S. government responds, I
anticipate that this matter will spark a sharp
increase in the price of gold.