Just because you retread a few memes about the gold reserves doesn’t make them true. For example, you claim KPMG has “NO ACCESS” to the vaults. Of course they don’t, that is why they accompany Treasury Inspectors. You imply the Treasury Inspectors are not independent, and you are right, since the Mint holds the gold on a custodial basis and the Mint is a bureau of the Treasury. But as a result, KPMG cannot “over see” the Treasury Inspectors, the auditors must do their own independent verification. Otherwise it is not an “independent audit” and KPMG is committing massive fraud by calling it that. Every report on this topic by “journalists” has confused the issue by conflating terms like “access”, “audit”, “oversee”, etc. Personally speaking, Jerome Corsi was kind enough to forward to me an email from a Treasury spokesman back in 2006 or 2007 in which it was laid out in a bit of detail how KPMG is involved in the vault audit. “No access” but just simply “over seeing” is a very faulty simplification.

The gold is actually collateral for Federal Reserve notes outstanding, but it is not needed for that (there is $1 trillion of excess collateral at this point). The reason this came to be is that back in 1933 when FDR seized the circulating gold certificates (which were backed directly by gold), there were FRNs issued as payment. Thus the redeemed gold was credited to the “gold certificate account” while newly-printed FRNs were debited. Until the early 1970s, foreign governments could redeem FRNs for gold and this gold certificate account was used to make settlement. Do note, however, that the FRNs being redeemed for gold were credited to the Treasury’s account at the Fed since the gold is legally owned by the Treasury.

In any case, the Fed does not have the right to encumber the gold, and the Fed’s involvement in “gold swaps” is a matter of rife speculation. In fact, since the Fed itself does not own any gold, it is hard to see how it could be engaged in gold swaps other than on the receiving side. It is easy to dishonestly take someone’s words out of context, whether they happen to be a Fed Gov or not.

I don’t care what the UK had or did not have, the question here is very specific: are the U.S. Gold Reserves being independently audited? The answer is an unequivocal yes, and to claim otherwise, regardless of the motives, is plain silly.

Once again, it is not silly to ask if the gold has been “obligated via swaps” or otherwise, although it would be the Treasury and only the Treasury that has the legal right to encumber the gold. I fully support getting to the bottom of the encumbrance question and have said so for years. But this is totally separate from the “independent audit” issue being raised by Dr. Paul. By the way, the Treasury department is also externally audited so an audit itself would probably not reveal any secret “swaps”.

Instead of this independent audit tack, Dr. Paul would be much better advised to introduce legislation requiring that the gold as reported in the Mint’s custody shall be maintained without encumbrance of any kind, including removing such gold from the collateral account of the Federal Reserve. This is an achievable goal and would actually require special audit procedures to make sure it is being complied with so as to increase whatever assurance there is in the independent audits now being conducted. And while it wouldn’t assuage the most extreme conspiracy-monger, it would be an important step in acknowledging the fiscal value and benefit that the gold reserves represent to the U.S.

As a post-script. let me add that I personally do not believe Dr. Paul knows what he is talking about some of the time, although I’ll grant that his motives do appear to be grounded in honesty, trust, integrity, etc. These virtues can, however, sometimes pave the path to hell. The fact is that NOTHING any government does would EVER be trusted by someone like Dr. Paul who often bases his thinking on conspiracies (”follow the money”) while ironically putting his full faith in the righteousness of the sovereign individuals (ironic because governments are run by individuals). Moreover, some of his followers tend to be much less reasonable than Dr. Paul himself.

Another post-script: With all due respect, even as someone who understands the importance of gold, I’ll wager the issue of Ft. Knox gold is probably about 99th in terms of priority for the general U.S. population right now. Most Americans are struggling with some issue or another that will not be impacted by the presence or absence of gold at Ft. Knox. And for a final bit of honesty, I’ll wager that 99% of gold bugs are hoping there is in fact no gold at Ft. Knox, for obvious reasons.

@Giuseppe
Nobody has the ability to “anticipate future discoveries”!!! The company was simply cheap, in the midst of a drilling program with significant potential to make a new discovery. It had already seen some interest due to the major gold intercept near surface. This created an open-ended possibility where a few decent deeper intercepts could have started the share price off and running. Obviously it didn’t turn out that way, the odds were simply too long and the company follow-up too stretched out. The difference with Oro Gold was a much higher market cap and while the completed drilling did have more significant results, the gold system itself appeared constrained with limited upside possibilities. Oro Silver is now more of a hold as the combined company is actually quite cheap and while we are not now looking for an immediate home run I think it is realistic to expect the shares to move substantially higher (as noted in my early commentary, some patience will be needed).

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August 26, 2010
DEFINITIVE MERGER AGREEMENT SIGNED
Oro Gold Resources Ltd. and Oro Silver Resources Ltd. announce that they have executed the definitive arrangement agreement under which Oro Gold will acquire all of the issued and outstanding securities of Oro Silver through a plan of arrangement.
…
The completion of the Transaction is subject to a number of conditions, including: … holders of not more than 5% of the Oro Silver shares exercising their right to dissent to the Transaction…

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are we going to exercise our right to dissent to the Transaction? the 5% limit is not so difficult to reach actually. Seems the market prefers Oro Gold: despite the 4:1 merger ratio, currently you need to sell 5 OSR shares (0.8 cad right now) to buy 1 OGR share (0.395 cad now).

Oro Silver was a stock I’ve averaged down more than once trusting your ability to anticipate future discoveries, but actually I did not understood why did you think it was supposed to sit on a big silver deep deposit. On the contrary it was easier for me to understand your interest in Oro Gold (you just said you did own the shares on a personal basis, not as M.A. suggestion) given the 11.9 g/t Gold Over 41 Metres intercept.

Now that the 2 companies are about to merger, time could be right for a brief comment, even if I understand you have a lot of different arguments to write about, companies to watch, etc. So I’ll perfectly understand if you weren’t able to update this story. I would just like to understand if OSR is still a buy as PKL, or if a partial swich from the first to the second is a good idea…

Giuseppe :

I know Turnagain project is not going to become a mine in the next decade or two, but I think HNC doesn’t need that to be a profitable trade from here. If we were not going in a double dip depression as I fear, and nickel price should rise some $, an external driver could easily pump this 13M$ microcap like it happened in the first half of 2010 when it tripled just because of chinese interest in Crowflight.

If I were to choose a nickel play my favourite would be Noront, and as a cobalt play my favourite still is Geovic, but I agree Formation Capital has got quite value at this price level.

Regarding the financings, recently there was Adex that was able to secure the financing of the capex for the tin-indium zone of their Mount Pleasant property, which also has a tungsten-moly zone. I was a shareholder in the past, in particular for the fact that this microcap could become one of the greatest indium producers of the world, but I exited when I rationalized my portfolio.
Now that the financing occurred (and shares in the placement were sold at 0.12cad, with a warrant at 0.18 cad of exercise price attached, vs current share price at 0.1 cad) I feel a new interest in this exotic metals value play.

But I agree time for these types of plays is not now. Being near the 1040 S&P level advise against dealing with these plays today. But I like to monitor my leverage kings. Should S&P rise over 1175 my scenario would turn into positive ground, and I could start accumulating rare and base metals value plays like Fortune, Adex and Noront.

I think it is a great idea to keep close track of these companies as there will be a point when things stabilize and the market takes new interest in them. I too feel that being defensive at this time is probably the right positioning but I don’t see a huge crash in stocks, more like a bear market continuation although in my view not approaching the March 2009 lows of 666 on the S&P (my informal target is 875, and that’s on a spike low). Yes, this is a muddle through scenario with the economy and markets dragging themselves along the bottom. Not very exciting to contemplate but the most likely to happen.