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Soaring demand spotlights secret NY gold hoard

By Agence France-Presse
Monday, August 1, 2011 7:11 EDT
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If there’s one place a James Bond villain — or even some actual governments — would love raiding today, it’s the basement of a somber building in lower Manhattan: the world’s biggest gold vault.

Gold prices hit a record $1,632.8 an ounce Friday, reflecting a nervous rush by private and national investors from stocks, dollars and euros to the safe-haven commodity.

And the biggest single pile of the stuff on the planet lies deep beneath the New York branch of the US Federal Reserve Bank, a stone’s throw from the Stock Exchange.

On a visit, a guide from the bank revealed the 7,000-ton hoard gleaming softly in a vault carved from Manhattan’s bed rock, five stories under the Big Apple’s teeming streets.

Cast in bricks, stacked ceiling-high in blue-painted, caged boxes, the heap is worth a staggering $350 billion.

As it happens, the United States is the world’s biggest Goldfinger with 8,133 tons in reserves, more than twice as much as number two Germany.

But the bulk of that treasure is stored at the famous Fort Knox and at West Point, while the gold below New York mostly belongs to 36 foreign governments seeking not just financial, but physical safety.

The owners’ identities are kept secret — all part of extraordinary security measures at the bank, which, barring in movies like the third “Die Hard,” has never been robbed.

An AFP reporter had to show identity papers through a bulletproof, soundproof screen before even entering the bank’s ornate lobby. From there, visitors were escorted into the subterranean elevator.

The vault is entered not through a door, but a tunnel secured by a gargantuan steel cylinder that rotates to block or open access.

Once inside, among the towers of gold, it takes three separate employees selected from different departments to open each triple-locked strongbox.

As if the fortress and swarms of armed guards were not enough, AFP’s reporter was ordered to put away his notebook in case he sketched the layout. Snap photographs? Forget about it.

An inscription at the entrance to the vault — gold-colored, naturally — quotes the German writer Goethe: “Gold is irresistible.”

That’s never been more true than now.

High demand is typical of turbulent times. In January 1980, the Soviet war in Afghanistan, the Iranian revolution and high oil prices sent gold to a record $850. Prices dropped back into the low hundreds of dollars and traded down at $543 as late as June 2006.

Now it’s the wobbly euro, lackluster dollar and the specter of US debt default driving investors — both private and at state level — into gold’s reassuring, expensive arms.

Spooked by the dollar’s weakness, central banks are joining the surge. Mexico purchased 93 tons at the start of this year, up from previous holdings of less than seven tons.

Russia, Thailand and China are among other countries with the gold-buying bug.

Peter Morici, a business professor at the University of Maryland, warns that gold is not all it seems.

“People think it’s the only safe haven but the reality is cash is probably the only one,” he said. “Historically, gold can go down almost as much as it goes up.”

However, there’s no doubting the allure of metal that has decorated kings, sparked mad voyages and legends, and is still deemed important enough by dozens of foreign governments to hide beneath New York.

“It’s an incredibly sought after piece of metal that’s so rare,” said Harry Pell, 34, a teacher who took his family on a public tour of the vault. “Our wedding rings are still made of gold after all.”

Another visitor, Leonardo Blake, 53, said gold will be for ever.

“People think it’s a magic metal that opens doors — and in a sense it is.”

Agence France-Presse
Agence France-Presse
AFP journalists cover wars, conflicts, politics, science, health, the environment, technology, fashion, entertainment, the offbeat, sports and a whole lot more in text, photographs, video, graphics and online.
 
 
 
 
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