Federal Reserve Bank of New York

The Federal Reserve Bank of New York (often referred to simply as "the Fed") has housed the world's largest stock of gold for many years, although little of it belongs to the United States, whose own reserves are largely in Fort Knox and other less well-known depositories. The Fed's stock of "earmarked gold", held on behalf of other countries and official financial institutions, originated with the reserves that were shipped over by several European central banks for safe-keeping on the eve of World War II. The bulk of it, however, was purchased by European central banks from the United States in the 1950s and 1960s, as they rebuilt their gold reserves, trading in dollars for gold at the Fed and keeping the bullion in New York to avoid the cost of shipping it home. Another factor at this time influencing the location of European official gold reserves was the perceived military threat from the Soviet Union.

At its peak, the Fed held over 12,700 tonnes (around 409 million oz), more than one-third of global official stocks, on behalf of 73 nations or international organisations, such as the IMF.

The Fed's famous 'gold window' closed in 1971 when the United States no longer sold gold for dollars at a fixed price, so the stockpile ceased to grow. The bank's reputation as an impartial safe haven was also shaken in 1979 when the US government froze 50 tonnes (1.6 million oz) of Iran's gold at the Fed during the Tehran embassy hostage crisis.

During the 1990s, almost 2,600 tonnes (83 million oz) of gold was moved out of the Fed as many other central banks mobilized their reserves for leasing, swaps or sale. In 2000 and 2001 there was a further outflow of 355 tonnes (11.4 million oz) and 259 tonnes (8.3 million oz) respectively, reducing stocks of "earmarked gold" at the Fed to 6,703 tonnes (215.5 million oz) at the end of December 2001. Much of the decline in stocks over the past dozen years has represented gold being moved to London for leasing; indeed, gold flows out of the Fed have in the past often followed hard on rises in the gold leasing rate, as central banks shifted more gold to benefit from higher rates. (Conversely, when leasing rates have been very low - the situation during much of the second half of 2001 - it has not paid foreign central banks to move stocks out of New York.) The improvement in security following the collapse of the Soviet Union has also encouraged some European countries to repatriate their gold holdings. The ongoing decline in Fed stocks means it may eventually lose the cachet of having the world's largest stock in its vaults, because US reserves in Fort Knox alone are around 4,600 tonnes.

The Fed, unlike the Bank of England, is not normally engaged in daily gold market operations and does not have the same 'in house' expertise on gold.

Federal Reserve Bank of New York
33 Liberty Street
New York
NY 10045
Tel. +1 212 720 5000
Web www.ny.frb.org