Whatever happened to the Donald Trump and Elon Musk visit to Fort Knox? You’ll recall the buzz. Trump and Musk loudly announced they were going to visit the US bullion depository at Fort Knox, Kentucky to make sure the US gold was actually there. The press was invited to tag along.
Musk claimed that his DOGE team was ready to ‘audit’ the gold bars to see that there were none missing.
This would be the mother of all photo ops.
In the popular imagination, all of the gold is in Fort Knox. That’s where they were headed to prove once and for all that the gold was actually there.
Elon Musk planned to livestream the entire visit using his Starlink satellite system. Trump vaguely threatened that if any gold were missing, there would be disastrous consequences for any wrongdoers who removed it.
The plot was set. The drama seemed irresistible.
Then, suddenly, the whole story went away.
Trump never mentioned it again after 26 February. It was as if the whole story never happened. It just went away. The question is, why?
Let’s answer that, beginning with the obvious point that the gold is all there.
There have been rumours of missing and stolen gold almost from the day the bullion depository was built.
The 1964 James Bond film Goldfinger is built around a plot to steal the gold. This speculation makes for good rumormongering but, in fact, the gold is all present and accounted for.
There are two reasons why the visit did not proceed. The first one is that the US government does not want to call attention to gold’s role as a monetary asset.
The Fed has a monopoly on the money printing press. The government has eradicated any memory of gold as money. Why bring it back to life with a high-profile visit to Fort Knox?
There’s another even more insidious reason why Trump and Musk backed off from their Fort Knox visit. Even allowing for the fact that the gold is actually in Fort Knox, the deeper question is whether that gold is leased out.
Gold leasing is an established market, but not well-understood by non-specialists. Basically, it’s a way for a gold holder to earn a return. Gold does not pay dividends or interest like stocks and bonds. But you can lease it to a third party and make 2% or so annually in lease payments.
The gold stays in the original vault. Gold leasing is a purely paper transaction. The lessee gets what’s called a right of rehypothecation. That means the lessee can lease the same gold to another party and so on.
With rehypothecation, one metric tonne of gold could support 100 metric tonnes of ‘paper gold’ transactions. The danger is obvious. If a group of paper gold investors suddenly demands physical delivery, the counterparties have to buy gold in the spot market since the leased gold is not in their physical possession.
The gold market is liquid, but not liquid enough to support delivery if there was demand for physical by more than a small slice of the paper gold market. A full-scale gold panic could emerge quickly. The spot price of gold would go to $25,000 per ounce before an investor could yell ‘buy!’
I take it that someone (probably Scott Bessent) sat down and patiently explained the paper gold reality to Trump and Musk. For the rest of us, the solution to this problem is simple – buy gold.
All the best,
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Jim Rickards,
Strategist, Strategic Intelligence Australia
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