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The Key
To The Gold Vault
(click on the key). Although working with gold
worth billions of dollars is a fascinating job, moving gold is
arduous work. Hydraulic lifts and conveyor belts partially relieve
the physical strain, but lifting, swinging, and positioning 27-pound
bars again and again is a laborious task. Compartments are identified by number, rather than by the countries that own the gold within them, in order to keep each country's gold holdings private. Only a few Bank employees know the identity of the gold owners. FROM HERSHEY BARS TO BUTTER BARS An examination of the gold bars stored in the vault can tell a lot about their origin and history. The shape of a bar may indicate whether it was cast in the United States or abroad. Before 1986, bars cast in this country generally were rectangular bricks: 7 inches long, 3 5 /8 inches wide, and between 1 5 /8 inches and 1 3 /4 inches thick. In recent years, however, gold bars cast in the United States, as well as most bars cast overseas, have been trapezoidal. A bar's shape also can tell where in the United States it was cast: bars from the Denver Mint have rounded corners, while those formed at the New York or San Francisco Assay Offices have square edges. Occasionally, visitors see a few bars that are much smaller than others. These bars, nicknamed Hershey Bars, are formed at the end of the casting process when there is not enough molten gold left in the smelter's crucible to produce a full bar. Because the purity of gold in different pourings varies, any remaining metal is not added to other pourings, but is cast into a separate, smaller bar. The seal stamped on each bar identifies where the gold was refined, as well as where the bar was cast. Other numbers identify its melt (the molten gold from which a bar is made) and its purity. None of the bars is 100 percent pure gold. Each has 0.5 percent or less of copper, silver, and other impurities that are difficult and expensive to remove. To qualify as good delivery in most international transactions, standard bars must be at least 99.5 percent pure gold and weigh between 350 and 430 troy ounces. Bars that meet that standard are called "fine" bars. All bars are gold in color, naturally, but some have tinges that can indicate the type of impurities, however modest, in the metal. Traces of silver and platinum give the gold a whitish shade, copper is most often found in reddish bars, and iron produces a greenish hue. One of the rarest forms is black gold, which contains traces of bismuth. The butter-yellow bars in the vault usually are made of newly mined gold. Some relatively old bars, originally cast in Europe and scarred from years of handling, can be found in the vault. The imperfections do not affect the value of a bar, as most scars are dents, rather than chips. Occasionally, the edge of a bar may have been notched, with an A stamped into it. The cut was made by the owner's assayer to sample the purity of the bar's gold. Gold weights, which are calculated in troy ounces, can be converted to weights in avoirdupois ounces or pounds, with which we are all familiar. The names of both weight systems have French derivations. The troy system is used to weigh gems and precious metals and is named after Troyes, France. The avoirdupois system, used to weigh just about everything but drugs, gems, and precious metals, takes its name from the French phrase "voir du pois," meaning goods of weight. It is based on the same unit of measure, the grain, which can be used to convert weight from one system to the other. The troy ounce contains 480 grains; the avoirdupois ounce is 437.5 grains. A standard 400-troy ounce gold bar weighs 438.8 avoirdupois ounces, or 27.4 avoirdupois pounds. POWER AND WORTH It is estimated that the gold in the vault represents a significant portion of all the monetary gold that has ever been mined. Most of the gold in existence today was mined during the twentieth century, much of it since the end of World War II. The International Monetary Fund reported that world gold reserves totaled about 900 million troy ounces in early 1997. The United States owned approximately 29 percent of this monetary gold.
The bullion in the New York Fed's vault belonging to the U. S. Government represents a very small fraction of the U. S. gold reserves. A majority of these reserves are held in depositories of the Treasury Department at Fort Knox, Kentucky, and West Point, New York. Most of the remainder is at the Denver and Philadelphia Mints and the San Francisco Assay Office. Totaling about 262 million troy ounces in 1997, the gold reserves of the United States officially are valued at about $11 billion. Valued at the approximate market price of gold, $319 per ounce, the U. S. Government's gold reserves are worth $84 billion, or $340 for each U. S. resident. AN INDISPENSABLE SECURITY SYSTEM Storing almost $86 billion of gold makes extensive security measures mandatory at the New York Fed. An important measure is the background investigation required of all Bank employees. Continuous supervision by the vault control group also prevents problems from arising by ensuring that proper security procedures are followed. The Bank and its vaults are guarded by the Bank's own uniformed protection force. Periodically, each guard must qualify with a revolver on the Bank's firing range. Although the minimum requirement is a marksman's score, most qualify as experts. In addition, the Bank's guards must be proficient with other weapons. Security also is provided by closed-circuit television monitors and by an electronic surveillance system that alerts the central guardroom when a vault door is opened or closed. The alarm system can signal guards to seal all security areas and Bank exits, which can be closed within seconds. The gold also is secured by the vault's design, which is a masterpiece of protective engineering. The vault is actually the bottom floor of a three-story bunker of vaults arranged like strongboxes stacked on top of one another. The massive walls surrounding the vault are made of a steel-reinforced structural concrete.
The weight of the gold - just over 27 pounds per bar - makes it difficult to lift or carry and obviates the need to search vault employees and visitors before they leave the vault. Nor do they have to be checked for specks of gold. Gold is relatively soft, but not so soft that particles will stick to clothing or shoes, or can be scraped from the bars. The Bank's security arrangements are so trusted by depositors that few have ever asked to examine their gold. A PHENOMENAL ASSET
Once referred to by John Maynard Keynes as a "barbarous relic" and by Johann Christoph Friedrich von Schiller as "almighty," this precious metal has aroused great passion. It undoubtedly will continue to do so long into the future. (click on the key). ###
The Federal Reserve Bank of New York serves the Second Federal Reserve District (each of the 12 Reserve Banks serves a geographic District in the United States). The Second District encompasses New York State, the 12 northern counties of New Jersey, and Fairfield County, Connecticut, as well as Puerto Rico and the Virgin Islands. The New York Fed and the other Reserve Banks supervise and regulate state-chartered banks that are members of the Federal Reserve System, and all bank holding companies and foreign bank branches and agencies based in their Districts. Each Reserve Bank provides services to depository institutions in its District and functions as a fiscal agent of the U. S. Government. The Federal Reserve Bank of New York has several unique responsibilities within the Federal Reserve System. Besides conducting open market operations (the buying and selling of U. S. Government securities in order to influence bank reserves and the availability of credit in the economy) to implement monetary policy at the direction of the FOMC, the Bank performs important international central banking functions. For example, the New York Fed engages in foreign exchange intervention on behalf of the U. S. Treasury and the Federal Reserve System. It also maintains relations with, and provides financial services for, foreign central banks. It is in conjunction with this role that the Fed serves as custodian for the gold reserves of foreign official and international accounts. Additionally, it invests the dollar reserves of those foreign customers in marketable U. S. Treasury securities. As of mid-1997, it held in custody over $630 billion of such securities.
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