Is U.S. currency still backed by gold
Is U.S. currency still backed by gold? Where is all the treasury gold in the USA held? How is the price of gold set? How much gold is in Fort Knox? The Board of Governors of the (USA) Federal Reserve System published answers to these questions on the “Current FAQS’ section of the Federal Reserve System website.
Is U.S. currency still backed by gold?
Federal Reserve notes are not redeemable in gold, silver, or any other commodity. Federal Reserve notes have not been redeemable in gold since January 30, 1934, when the Congress amended Section 16 of the Federal Reserve Act to read: “The said [Federal Reserve] notes shall be obligations of the United States….They shall be redeemed in lawful money on demand at the Treasury Department of the United States, in the city of Washington, District of Columbia, or at any Federal Reserve bank.” Federal Reserve notes have not been redeemable in silver since the 1960s.
Congress has specified that Federal Reserve Banks must hold collateral equal in value to the Federal Reserve notes that the Federal Reserve Bank puts in to circulation. This collateral is chiefly held in the form of U.S. Treasury, federal agency, and government-sponsored enterprise securities.
Does the Federal Reserve own or hold gold?
The Federal Reserve does not own gold.
The Gold Reserve Act of 1934 required the Federal Reserve System to transfer ownership of all of its gold to the Department of the Treasury. In exchange, the Secretary of the Treasury issued gold certificates to the Federal Reserve for the amount of gold transferred at the then-applicable statutory price for gold held by the Treasury.
Gold certificates are denominated in U.S. dollars. Their value is based on the statutory price for gold at the time the certificates are issued. Gold certificates do not give the Federal Reserve any right to redeem the certificates for gold.
The statutory price of gold is set by law. It does not fluctuate with the market price of gold and has been constant at $42 2/9, or $42.2222, per fine troy ounce since 1973. The book value of the gold held by the Treasury is determined using the statutory price.
Although the Federal Reserve does not own any gold, the Federal Reserve Bank of New York acts as the custodian of gold owned by account holders such as the U.S. government, foreign governments, other central banks, and official international organizations. No individuals or private sector entities are permitted to store gold in the vault of the Federal Reserve Bank of New York or at any Federal Reserve Bank.
A small portion of the gold held by the U.S. Treasury (roughly $600 million in book value)—about five percent—is held in custody for the Treasury by the Federal Reserve Banks, as fiscal agents of the United States. The vast majority of this gold is located in the vault at the Federal Reserve Bank of New York, and a very small portion is on display in several Federal Reserve Banks. The remaining 95 percent of U.S. Treasury gold ($10.4 billion in book value) is held in custody for the Treasury by the U.S. Mint.
And according to the July 2013 Status report of U.S. Treasury-Owned Gold, there are 147,341,858.382 fine troy ounces held at Fort Knox, Kentucky; 43,853,707.279 fine troy ounces in Denver, Colorado; and 54,067,331.379 fine troy ounces in West Point, New York.
To see the articles in their entirety, visit the Federal Reserve System website: Current FAQs, Federal Reserve.
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You failed to mention that that gold that was transferred — for which the irredeemable gold certificates were issued — is held strictly as collateral against US dollars. The government is forbidden to sell or even borrow against it. And its current value covers a quarter — 25% — of all dollars outstanding, the other 75% backed chiefly by US bonds. So the dollar is well secured by gold, if not technically “backed”