Saturday, July 31, 2010

The Federal Reserve Bank of New York: The World's Gold Vault

Federal Reserve Bank of NY Image
It is the largest accumulation of gold anywhere in the world, and it is not Fort Knox

Gold has captivated the human race for most of our recorded history. Kings and queens have fought wars over it, European explorers searched new worlds for it, and 49ers left family and friends for a chance to get their share of it.

The Power of Gold

The World Gold Council estimated that by the end of 2009, about 5.3 billion troy ounces of gold had been mined throughout human history. In spite of the famous gold rushes of the 19th century, over half of that gold was mined since 1950. A significant portion of that gold is currently stored within the United States, but it’s not where most people think it is.

When we Americans think of gold, the first place that comes to mind is the United States Bullion Depository known as Fort Knox. It is here that the largest portion of our official gold reserves is stored. But there is one place in the U.S. that stores even more gold than Fort Knox. That place is the Federal Reserve Bank of New York.

Federal Reserve Bank of NY Image
The Federal Reserve Bank of New York

The Federal Reserve Bank of New York holds only a small fraction of the United States gold reserves, but it does hold the largest amount of gold stored anywhere in the world. Over 200 million troy ounces of gold, much of it belonging to foreign countries, are currently being held at the bank.

When the main vault at the bank first opened, the Secret Service used 45 armored cars to move the initial deposits of gold through the streets of New York. 150 policemen lined the streets and stood guard at strategic points as the armored cars drove by. Secret Service agents were everywhere and riflemen watched from the rooftops above. They hauled over 700 tons of gold, silver, and paper currency to the bank.

The Main Vault

Opened in 1924, there is no other vault in the world quite like it, and it’s located right in the center of busy lower Manhattan. The main gold vault lies some 80 feet below the surrounding streets. The vault was actually excavated before the building was built around it. It is situated on the island’s bedrock which was considered stable enough to support the weight of all the gold that was to be stored inside.

Federal Reserve Bank of NY ImageAnd the main vault has no doors.

The only way into the vault is through a 10-foot long tunnel that is cut into a 90-ton steel cylinder that revolves in a 140-ton steel and concrete frame. In order to gain access into the vault, the cylinder has to be rotated 90 degrees after first unlocking a series of time and combination locks.

You can view an artist’s rendering of how the vault works in the March 1931 issue of Popular Mechanics magazine (page 459).

The Gold

The gold at the New York Fed is stored in the vault in the form of bars, each weighing 400 troy ounces or just over 27 pounds apiece. The value of each bar at recent prices would be approximately $480,000.

However, each bar is not the same. Gold bars cast more than 20 years ago tend to be in the shape of bricks, while more recent bars are trapezoidal.

In addition to the large bars, there are smaller bars that are also stored in the vault. These bars vary in size and are created using the gold that’s left over from the casting process, but is not enough to create a normal bar. These bars are sometimes referred to as “Hershey Bars.”

The color of the gold also tells a story. Impurities in the gold can cause each bar to exhibit a different colored hue. A greenish hue indicates iron in the gold, while red indicates copper. A whitish look to the gold can be caused by a silver or platinum alloy. Black gold results when the bar contains traces of bismuth, a basic metal used in magnets and alloys.

Numismatic ExhibitsFederal Reserve Bank of NY Image

One of the great things about visiting the Federal Reserve Bank of New York is the extraordinary exhibit on the history of money. The exhibit features some 800 coins and currency from the American Numismatic Society’s famous collection. What makes this exhibit special is the variety of items in the display from ancient coins to hard times tokens to some of today’s great numismatic rarities. One of my favorite items is the only “legal to own” 1933 St. Gaudens $20 gold double eagle that sold in 2002 for a then record of $7.5 million.

A Mindboggling Amount of Money

With over 200 million troy ounces of gold being stored at the New York Fed, the market value of all that gold today would lie in the vicinity of a quarter of a trillion dollars.

And that’s not all.

There is also a 3 story high vault for storing cash. Manned by robots and the size of a football field, the cash vault has the capacity to hold $350 billion dollars worth of U.S. currency. That’s more than the total market value of the gold.

So the next time you are in New York, make sure you stop by 33 Liberty Street for a visit and allow yourself to be taken in by the power of gold. Just don’t expect someone to offer you a “Hershey Bar” if you get hungry while you’re there.

Sources

Cannon, Gwen, ed. The Green Guide: New York City. New York: Michelin Apa Publications, 2007.

Carmichael, P. A. “Forts on Wheels Defy Bandits,” Popular Science Monthly, Vol. 112, No. 6 (June 1928).

“How Uncle Sam Guards His Millions in Vaults of Federal Reserve Banks,” Popular Mechanics, Vol. 55, No. 3 (March 1931).

The Key to the Gold Vault. New York: The Federal Reserve Bank of New York, Reprinted 2008.

World Gold Council. "Frequently Asked Questions." http://www.gold.org/faq/answer/76/how_much_gold_has_been_mined/ (accessed July 29, 2010).

Image Sources

All images are Federal Reserve Bank images (see Title 17, Chapter 1, Section 105 of the United States Code).

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