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Hurricane's aftermath gives NY Fed a rationale for suspending access to gold vault

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Published : November 06th, 2012
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Category : GoldWire





Did all those gold swap documents get wet too?

* * *

About That Gold Stored in Flood-Prone Lower Manhattan

By Nick Summers
Bloomberg News
via Bloomberg Business Week
Sunday, November 4, 2012

As New York City continues to dry out in the aftermath of Hurricane Sandy, the financial world is reconsidering just how smart it is to place critical pieces of infrastructure in flood-prone areas. Citigroup's waterlogged building at 111 Wall St. will be unusable for several weeks, and two critical Verizon Communications facilities suffered extensive flooding during the storm.

At least the material at those sites is replaceable. What about the nearly 15 million pounds of gold bricks stored at the New York Fed?

They're safe -- and will be, in theory, should floodwaters return. The bullion is so heavy that its vault sits 80 feet below street level, and 50 feet below sea level, on the bedrock beneath Manhattan. Though the bank's fortress-like building is located far downtown, close to where other financial institutions sustained water damage, the property at 33 Liberty St. sits in the city's evacuation zone C, where residents are told to expect storm-surge flooding only from major -- Category 3 or 4 -- hurricanes that hit the New York harbor.

The New York Fed is tight-lipped about how it secures the planet's largest concentration of gold, referring questions on the subject to a brochure --

-- published on its website. The pamphlet claims that the vault is protected by an "airtight and watertight seal" created by lowering a 90-ton steel cylinder just three-eighths of an inch into a 140-ton steel-and-concrete frame -- an effect "similar to pushing a cork down into a bottle."

Other security measures include closed-circuit video feeds, firearms training for guards, and the weight of the gold itself. At 27 pounds per bar, it's hard to smuggle one out in a pocket. "The bank's security arrangements are so trusted by depositors that few have ever asked to examine their gold," the New York Fed writes.

That, obviously, has helped fuel a string of conspiracy theories -- the gold isn't really there, isn't really gold, or is otherwise suspect. The Los Angeles Times reported in August that the federal government was conducting its first audit of the bullion it stores beneath Liberty Street, drilling tiny holes into selected ingots and analyzing the metal.

Ordinarily you'd be able to eye the gold bars yourself. Some 25,000 visitors tour the bank's vault each year. Those visits, the bank says, have been canceled indefinitely "due to the aftermath of Hurricane Sandy."



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Chris Powell is the secretary of the Gold Anti-Trust Action Committee (GATA) which has been organized to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities.
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