Dollar Dominance Shows Cracks as Fort Knox Gold Audit Questions Persist

Mike Maharrey, host of the Money Metals Midweek Memo, opened a recent episode with a straightforward banking analogy: imagine someone who repeatedly claims to have $100,000 in the bank yet refuses to produce a statement or balance a checkbook. The funds might exist, but absent verification, skepticism would be entirely rational.

That scenario, Maharrey argued, mirrors the current state of America's gold reserves. He believes the gold at Fort Knox is probably there — but "probably" does not equate to an independent, comprehensive audit.

That question formed one half of the episode. The other focused on an issue Maharrey considers potentially more consequential for the broader economy: recent U.S. intervention to prop up the Japanese yen, and what the unusual mechanics of that intervention reveal about the eroding position of the U.S. dollar.

The Dollar's Reserve-Currency Advantage Under Pressure

The United States recently intervened in currency markets to support the Japanese yen. While such interventions are not extraordinary in themselves, Maharrey contended that the manner in which Washington executed the operation was revealing.

The dollar's reserve-currency status plays a foundational role in the U.S. monetary and fiscal framework. Global demand for dollars absorbs a portion of the currency created by the Federal Reserve, and international appetite for U.S. Treasuries helps finance federal borrowing. The dollar has anchored the global monetary system since the 1944 Bretton Woods Agreement, which pegged world currencies to the dollar and the dollar to gold. When President Richard Nixon suspended dollar-gold convertibility in 1971, the dollar became a fiat currency — but its entrenched reserve role endured, sustaining demand that helps keep U.S. borrowing costs lower than they might otherwise be.

Maharrey emphasized that the dollar is unlikely to lose its reserve-currency status overnight. In his words, it remains the "cleanest dirty shirt in the laundry hamper." Nevertheless, persistent borrowing, spending, debt accumulation, and money creation are gradually rendering the monetary system more fragile.

Ordinarily, if the United States wants to strengthen the yen, it can sell dollars and use the proceeds to purchase yen. Greater demand for yen bolsters the Japanese currency, but selling dollars simultaneously places downward pressure on the greenback.

This time, however, the Treasury took a different approach. Rather than buying yen with dollars, the U.S. used euros from its own reserves — enabling Washington to support the yen without directly selling dollars. According to the Financial Times, the operation "blindsided" the European Central Bank, which was not informed until after the fact.

Why Washington Avoided Selling Dollars

UC Berkeley economist Barry Eichengreen argued in the Financial Times that the unusual transaction pointed to a deeper concern: Treasury Secretary Scott Bessent and other U.S. officials may have feared that selling dollar securities to support the yen would add further pressure to the long end of the Treasury market.

This is significant because weakening demand for Treasury securities translates into lower bond prices and higher yields. Elevated yields, in turn, mean higher borrowing costs for the federal government — a burden that compounds against a national debt now exceeding $36 trillion.

Maharrey illustrated the dynamic with a simple example. If the 10-year Treasury yield stands at 3.5 percent rather than 2.5 percent, the government must pay substantially more to borrow — a particularly acute problem when Washington already spends more than $1 trillion annually on interest alone.

Japan's predicament sharpens the dilemma. When Japan needs to bolster the yen, it can sell U.S. Treasury securities, receive dollars, and use those dollars to purchase yen. Japan has evidently been doing precisely that. Its foreign currency reserves dropped by $75.6 billion in May, a figure Bloomberg reported broadly matched the scale of yen intervention that month. Federal Reserve custody data likewise showed a decline in Japanese Treasury holdings consistent with liquidation.

Japanese Treasury sales, however, create complications for Washington. Additional Treasuries flooding the market can push prices lower and yields higher at the very moment the U.S. government needs to borrow enormous sums.

By stepping in to purchase yen directly, Washington could accomplish two objectives simultaneously: support Japan's currency and reduce Japan's need to offload Treasuries.

An Alternative Path: The FIMA Repo Facility

Japanese officials have signaled they intend to use the Federal Reserve's Foreign and International Monetary Authorities (FIMA) Repo Facility for future currency-support operations.

The Fed established the facility in March 2020 after foreign institutions needing dollars began dumping Treasuries during the pandemic, contributing to severe volatility and dysfunction in the Treasury market.

FIMA offers eligible foreign monetary authorities an alternative. Instead of selling Treasuries outright, they can pledge those securities as collateral and obtain dollars from the Federal Reserve. The loans carry a maximum maturity of seven days but can be rolled over.

For Japan, this creates a mechanism to acquire dollars for yen support without flooding the open market with Treasury securities. For Washington, it potentially eliminates another source of selling pressure in the bond market.

Why Hold Reserves You Cannot Freely Use?

For Maharrey, this is where the narrative shifts into a de-dollarization story.

Eichengreen argued that these developments suggest the dollar's reserve-currency status "is not what it used to be." Central banks traditionally hold dollar reserves in part because the Treasury market is deep and liquid, allowing those assets to be bought, sold, and deployed for currency interventions.

But what happens when foreign central banks face pressure not to sell their Treasury holdings because Washington is concerned about the impact on its own bond market?

Why hold reserves, Maharrey asked, if they cannot be freely used when needed?

Eichengreen cautioned that the dollar is becoming less attractive as a reserve currency and predicted other countries could intensify their search for alternatives. Reserve diversification — another form of de-dollarization — could accelerate. That trend already has momentum: countries including China, Russia, and India have expanded bilateral trade settlements in their own currencies through mechanisms such as BRICS financial cooperation arrangements.

Gold Poised to Benefit

Gold represents one obvious alternative.

Capital Economics economist Kieran Tompkins argued that concerns about central banks conducting foreign-exchange operations without provoking objections from U.S. officials over Treasury-market consequences could provide fresh impetus for central bank gold demand.

This is significant because central bank buying has been one of the primary pillars underpinning the gold bull market in recent years. The World Gold Council has reported record or near-record official-sector purchases for three consecutive years, with China, Poland, and Singapore among the most active buyers.

Maharrey contended that this demand has helped gold maintain levels around $4,000 despite significant interest-rate headwinds and relatively subdued enthusiasm among Western investors. Asian investors, by contrast, have been aggressively purchasing during the recent dip.

With expectations for further Federal Reserve rate hikes diminishing and gold showing signs of breaking out of its range-bound trading pattern, Maharrey sees multiple indicators pointing toward a continuing bull market for the metal.

Senator Rand Paul Visits Fort Knox

The second half of the episode shifted from international currency markets to America's most storied gold vault.

A few weeks earlier, Treasury Secretary Scott Bessent had asserted that all the gold at Fort Knox was present and accounted for — while acknowledging he had not personally visited the facility.

Then Senator Rand Paul traveled to Fort Knox. After spending roughly one to two hours inside the U.S. Bullion Depository, Paul emerged and declared the gold was there, totaling approximately 147 million ounces.

Maharrey was not persuaded.

Based on the quantity of gold the government says Fort Knox contains, there should be more than 300,000 gold bars inside. Many are not even standard modern bullion bars, as some Fort Knox holdings originated from coins melted down following the gold policies of the 1930s. These bars can have irregular weights and insufficient purity to qualify for international settlement.

In Maharrey's assessment, there is simply no way anyone could verify more than 300,000 bars during a brief guided tour.

A Tour Is Not an Audit

Money Metals CEO Stefan Gleason sharply criticized the visit, arguing Paul had effectively been "rolled" after being granted the opportunity to tour the secretive facility.

Gleason noted that Money Metals operates a precious-metals depository twice the physical size of Fort Knox. A brief visit, he argued, cannot establish that America's gold is fully accounted for — let alone answer questions about whether any portion is encumbered.

Purity is another concern. Gleason stated that 83 percent of the gold is unacceptable on global markets due to insufficient purity.

The episode is especially striking given that Paul co-sponsored the Gold Reserve Transparency Act of 2025, along with prime sponsor Senator Mike Lee. That legislation would have mandated a comprehensive audit of U.S. gold reserves.

Sound Money Defense League director Jp Cortez questioned why Paul would back a bill calling for a genuine accounting and then seemingly substitute a Fort Knox "field trip" and verbal assurances that everything was present.

What a Legitimate Fort Knox Audit Would Entail

Maharrey stressed that a bona fide audit requires far more than walking through a vault.

A proper independent examination would demand that every bar be counted and inspected. Serial numbers would need to be reconciled against official records. Gold would need to be assayed to verify weight and purity. The resulting documentation would then need to be published for public scrutiny.

An audit would also need to address chain of custody and potential encumbrances. Has any Fort Knox gold been loaned to another entity? Has it been pledged, leased, swapped, or mobilized in currency operations? Does any other party hold full or partial claims against metal stored inside the vault?

Without a comprehensive published audit, Maharrey argued, the public simply cannot know.

The Resistance to Verification

This leads to what Maharrey called the "$6 billion question": why not simply audit the gold?

He pointed to 1974, when officials opened the Fort Knox vaults to outside visitors. Maharrey characterized that event as another publicity exercise rather than the rigorous accounting needed to resolve the matter.

The continuing resistance to an independent audit, he argued, only breeds suspicion. If a private company refused to audit its books and grew hostile whenever someone suggested doing so, such behavior would hardly inspire confidence.

Money Metals has direct experience with what a genuine bullion audit involves. The Money Metals Depository is larger than the U.S. Bullion Depository and undergoes both internal and external auditing.

For Maharrey, that should be the standard: verification, not assurances.

The Common Thread

The two seemingly disparate topics of the episode ultimately converged around a single theme.

The dollar's international position is showing signs of strain as the United States struggles to sustain demand for Treasury securities. Simultaneously, Washington continues asking Americans to accept assurances about the nation's gold holdings without the kind of comprehensive public audit that would settle the matter definitively.

Maharrey also pointed to the long-running erosion of purchasing power, noting that government policy is effectively designed to devalue money by more than 10 percent every five years.

His conclusion: individuals should not depend on policymakers to preserve their wealth. Instead, he argued that holding sound money — physical gold and silver — can provide a means of protecting purchasing power from monetary debasement.

The dollar may remain the world's dominant reserve currency for some time. But as Maharrey put it at the close of the episode: "the dollar is not what it used to be."