When buying gold bullion, it is not uncommon for a vendor or dealer to assure investors (especially in online and other sight-unseen purchases) that delivery of the coins or bars are as secure as the legendary US repository of 24k gold bars, coins and bricks: Fort Knox.

This massive storage depot for precious metals, more formerly known as the United States Bullion Depository, is actually the second largest in the US as of the early 'aughts. In fact, it is a little-known fact that more bullion coins, bars and bricks are held in vaults at the Federal Reserve Bank in New York City, though much of it is from foreign depositors.

The Fort Knox site, encompassing many thousands of acres, has been used on and off for over 150 years. Though the site has strategic importance and was used by both Union and Confederate forces during the Civil War, construction of the modern facility didn't begin until after World War I. Construction on the depository didn't begin until 1936 – 3 years after President Roosevelt nationalized the gold supply with Executive Order 6102.

The initial deposits required 500 box cars to move many tonnes of gold bullion. Investment in this ultra-secure location, valued at an almost reasonable 8 million inflation-adjusted dollars, has continued since, though the gold stored there continues to be valued at the 1933-adjusted price of $42.22 per ounce after buying gold bullion from citizens at about half that price.

Fort Knox, as anyone who is even a little interested in gold bullion investing knows well, remains one of the most secure facilities ever constructed. This has been made famous in both television and film media, perhaps most notably by the 1964 James Bond film, Goldfinger. In addition to its history as a repository of gold, holding as much as 650 million ounces in the 1940s, irreplaceable historical objects such as the Magna Carta and the Declaration of Independence have also been stored here.

While tourists are allowed to see the outside of the facility and take pictures, the Depository itself is entirely secure, with no visitors allowed. In addition to the US Mint Police guard that keeps constant watch, the gold vaults themselves are also reinforced with hundreds of tons of steel, concrete and granite. The vaults are separated into several smaller rooms and are on the second floor.

With the exception of the occasional testing of small amounts of gold for purity, the gold in Fort Knox is in long-term storage, with no major deposits or withdrawals in several decades. Like some sort of spy movie, the 20-ton vault door can only be opened with several combinations, with no single person knowing more than one section of the code.

For the average investor buying gold bullion one or two ounces at a time, such security measures aren't necessary, but it is useful to have a good, secure place in mind to keep them before you purchase bullion bars or coins, no matter how trusted your dealer might be. Though not holding nearly as much gold bullion as it once did, the current holdings of over 150 million ounces are still the largest state-owned collection in the world.

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Linda Hess

April 18, 2009