The Treasury Department has released the results of a gold audit on the Treasury’s gold holdings stored at the NY Fed which began in 2010. Not surprisingly, the Treasury report claims that the audit found no issues with the quality of the gold held at the NY Fed, or in any policies or procedures by the NY Fed.

The audit reportedly claims that in 3 of 367 tests of the gold’s purity, the gold was more pure than Treasury records had previously indicated, and as a result has increased the book value of the US’ gold holdings by 27 ounces.

The most newsworthy revelation in the report however was that the US (which is supposed to hold the vast majority of its gold reserves at the NY Fed) holds a total of 32,021 good delivery bars on deposit at the NY Fed:
As part of the audit, the Treasury tested a sample of the government’s 34,021 gold bars in the New York Fed’s vault five stories below Manhattan’s financial district.

Why is this so significant?  As anyone with a simple calculator can discover, the Treasury department has just inadvertently admitted that rather than the official 8,133.5 tons the Treasury reports as the US’ official gold reserves, the Treasury’s actual physical gold stores at the NY Fed are a measly 466.57 tons!   While the Treasury does reportedly also hold gold at Fort Knox, several reports have claimed that up to half of the US Gold is held at the NY Fed!
No wonder it will take the Bundesbank 7 years to repatriate 300 tons!

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Damage control time- guys, the gold is more pure than even we thought!  As the LA times reports:

As part of the audit, the Treasury tested a sample of the government’s 34,021 gold bars in the New York Fed’s vault five stories below Manhattan’s financial district, according to the inspector general’s office. Auditors drilled tiny holes into the bars to remove samples that were tested for fineness in a process called assaying.

In three of the 367 tests, the gold was more pure than Treasury records indicated, according to  the Treasury’s inspector general. As a result, the government notched up the value of its gold holdings by approximately 27 fine troy ounces – or about $43,500, based on gold’s market value Monday.

Something tells us that the Germans and the Swiss might like a 3rd party audit rather than a private, internal audit.  The second glaring issue that the Treasury Department’s audit completely misses is Central bank leasing and rehypothecation.  Tungsten filled gold is only one concern.  
The other (and likely much more rampant) is leasing, swapping, and rehypothecation of physical gold bars stored on deposit at the NY Fed (& BOE).

Unfortunately for the Treasury Department and the NY Fed, the timely release of their internal audit (a month after the Bundesbank’s gold repatriation request) reeks of a desperate attempt to put out a loss of confidence contagion among the world’s Central banks. 

Got PHYZZ (in your own vault)??

The Treasury Department’s full audit findings can be found at the link below:

http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG13031.pdf