Far beneath the rush of daily activity at the New York fed lies one of the wonders of the modern world: the gold vault. The following excerpt from New York's "key to the gold vault" gives readers a first-hand glance at the operations of and history behind the federal reserve system's only gold vault.

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Visitors to lower Manhattan usually are impressed by the financial community's frenzied pace. The people working in its offices and the pedestrians on its streets never appear to slow down. However, one of the financial district's least hectic places provides one of its most impressive sights: the gold in the vault of the Federal Reserve Bank of New York.

Resting on the bedrock of Manhattan Island, 80 feet below street level, is the world's largest known accumulation of gold. The gold vault of the Federal Reserve Bank of New York attracts more than 22,000 visitors a year. The bank does not own the gold; it serves as its custodian. Almost all of the gold bars or bullion belongs to foreign central banks and international monetary organizations.

The gold is secured in a most unusual vault, an impressive chamber nearly half the length of a football field. It contained approximately 315 million troy ounces of gold early in 1991, comprising approximately 26 percent of the world's official monetary gold reserves. The value of the gold in the vault was $13 billion at the official U.S. government price of $42.2222 per troy ounce, or about $126 billion at a market price of $400 an ounce. At the current official U.S. government price, one of the vault's 400 troy ounce gold bars is valued at about $17,000. At a market price of $400 a troy ounce, the same bar is worth about $160,000.

The reasons why foreign governments store their gold at the Federal Reserve Bank of New York can be summarized in three words: confidence, convenience and centrality.

Confidence results from the bank being part of the Federal Reserve System, an agency of the U.S. government and the nation's central bank. The political stability and economic strength of the United States, as well as the physical security provided by the bank's vault are important factors.

Convenience accrues from the international operations of the Federal Reserve Bank of New York. Besides handling foreign financial transactions for the U.S. Department of the Treasury and the Federal Reserve System, the bank, acting as an agent, often executes financial transactions in the United States for foreign central banks.

Centrality is due to the bank's location. Having gold deposited in the trade and financial capital of the world's largest economy enables international payments to be made easily, quickly and inexpensively. The ability to make gold transfers between nations within the confines of the vault merely by moving bars from the compartment of one country to another was a major attraction.

A Shipment Arrives

The gold stored in the bank is in the form of bars resembling construction bricks. When the gold is shipped to the bank it is stacked on wooden pallets like those used in warehouses. To reach the vault, the bullion-laden pallets must be loaded into one of the bank's "security" elevators and sent down five floors below street level to the vault floor. The elevator's movements are controlled by an operator located in a distant room who is in contact by intercom with the armed guards who are accompanying the shipment.

Once inside the vault, the gold bars become the responsibility of a control group, consisting of representatives of three of the bank's divisions: auditing, vault services and protection. A member of each of the three divisions must be present whenever gold is moved or whenever anyone, even the bank's president, enters the vault.

All bars brought into the vault are carefully checked and weighed. These steps are critical, since the weight and purity of a bar determine its value and acceptability in international transactions. A power hoist lifts the gold onto an old-fashioned, but very precise, balance scale. It weighs gold to the nearest 1/100 of a troy ounce, equal to one-third the weight of a dollar bill. The vault control group verifies the weight, serial number and the purity measure stamped on each bar against an accompanying manifest.

If everything is in order, the gold is moved to one or more of the vault's 122 compartments assigned to depository countries or placed in one of the "library" compartments shared by several countries, where the gold is stored on shelves. The bars are stacked in a compartment one at a time in an overlapping pattern similar to that used to stabilize a brick wall. Each compartment is secured by a padlock, two combination locks and an auditor's seal. Three members of the vault control group, which is responsible for these locks, must be present whenever a compartment is opened or closed.

The Fed does not charge for holding gold, but a nominal handling fee is levied when gold enters, is moved within or is shipped out of the vault. Compartments are identified by number rather than by the names of gold owners. Nations, like individuals, prefer to keep their bank balances private. Only a few bank employees are allowed to know the identity of gold owners.

The gold in compartment number 86, which faces the vault entrance, is arranged as a display. The compartment contains 5,160 bars valued at about $87.1 million at the official rate of $42.2222 and $825.6 million based on a market price of $400 an ounce. Its capacity of about 6,000 bars makes it one of the smaller compartments. The largest compartment contains about 107,000 barsliterally a wall of gold 10 feet high, 10 feet wide and 18 feet deepvalued at about $1.8 billion at the official rate and $17.1 billion at a market price of $400 an ounce.

Security is Essential

The gold is secured by the vault's design, which is a masterpiece of protective engineering. The gold vault is actually the bottom floor of a three-story bunker of vaults arranged like strongboxes stacked on top of one another. The massive walls surrounding the vault are made of reinforced structural concrete.

There are no doors into the gold vault. Entry is through a narrow 10- foot passageway cut in a delicately balanced 9-feet tall, 90-ton steel cylinder that revolves vertically in a 140-ton steel and concrete frame. The vault is opened and closed by rotating the cylinder 90 degrees so that the passageway is clear or blocked. An airtight and watertight seal is achieved by lowering the slightly tapered cylinder three-eighths of an inch into the frame, similar to pushing a cork down into a bottle. It is secured in place when two levers insert eight large bolts recessed inside the frame into the cylinder. By unlocking a series of time and combination locks, the vault can be opened the next business day. The locks are under "multiple control"no individual has all of the combinations necessary to open the vault.

The bank and its vaults are guarded by one of the largest private, uniformed protection forces in the nation. Each guard must qualify periodically with a revolver on the bank's firing range. Although the minimum requirement is a marksman's score, most qualify as experts. In addition, the bank's guards must be proficient with other weapons. Additional security is provided by closed-circuit television monitors and by an electronic surveillance system that alerts the central guardroom when a vault door is opened or closed. The alarm system can signal guards to seal all security areas and bank exits.

An examination of the gold bars stored in the vault can provide an indication of their origin and history. The shape of a bar may indicate whether it was cast in the United States or abroad. Before 1986, bars cast in this country were generally rectangular bricks, 7 inches by 3-5/8 inches long and between 1-5/8 inches and 1-3/4 inches thick. In recent years, however, gold bars cast in the United States and most bars cast abroad have been trapezoidal.

It is sometimes possible to tell by the shape of a bar where it was cast: bars from the Denver Mint have rounded corners while those formed at the New York or San Francisco Assay Offices have sharp corners.

Occasionally, visitors see bars that are smaller than others. These bars, nicknamed "Hershey bars," are formed at the end of the casting process when there is not enough molten gold left in the smelter's crucible to produce a full bar. Since the purity of gold in different pourings varies, any remaining metal cannot be added to other pourings. Instead, it must be cast into a separate bar.

Gold at a Glance

Most of the bars contain gold from four areas of the world. South Africa is the largest producer, supplying about one-half of all newly mined gold. Russia ranks second, accounting for one-fifth of the gold produced each year. Canada and the United States are other important sources of gold. Most of the gold is extracted from rock veins reached by open pit mines or by mine shafts extending thousands of feet underground. A small share of the gold comes from nuggets found on the surface of the earth and from particles washed into the beds of streams and rivers.

Relatively old European bars scarred from years of handling can be found in the vault. These imperfections do not affect the value of a bar, since most scars result from dents rather than chips. Occasionally, the edge of a bar may appear to have been notched. This cut was made by the owner's assayer to sample the purity of the bar's gold. After testing, assay "chips" are added to the gold used to make other bars.

Monetary Gold

It is estimated that the gold in the vault represents a significant portion of the gold that has been mined throughout history. Most of the gold in existence today was mined during the 20th century, much of it since the end of World War II. The International Monetary Fund reported that world gold reserves totaled about 1,145 million troy ounces at the end of 1990. The United States owned 23 percent of this monetary gold, an amount about equal to the combined holdings of West Germany, France and Switzerland.

The bullion in the vault belonging to the U.S. government represents a very small fraction of the nation's gold reserves. The government stores U.S. gold in other vaults. More than half of it is held in depositories at Fort Knox, Ky., and West Point, N.Y. Most of the remainder is at the Denver and Philadelphia mints and the San Francisco Assay Office. Totaling about 262 million ounces at the end of 1990, the gold reserves of the United States are officially valued at about $11 billion. If they were valued at the market price of gold, say $400 an ounce, the government's gold reserve would be worth $105 billion, equivalent to $420 for each U.S. resident. It also means that every time the price of gold fluctuates by just one cent, the market value of the Treasury's reserves rises or falls by about $2.6 million.

Intriguing Provenance

Suppositions about the origins of the gold in the vault must be conjecture. However, since the metal is virtually indestructible, much of the gold used for monetary and decorative purposes over the centuries remains in existence today. It is possible that some of it could have been used in smelting the gold used to form the older bars in the vault. Some of the gold could have come from ancient coins, for gold has been used as a currency since the sixth century B.C.

The search for gold over time has had a great influence on world events. Some of the vault's gold could have a long and fascinating history. Gold has been used for decorative purposes since 3,000 BC and some of it could have been melted down into bullion. The gold could have been found in the tombs of the pharaohs and captured from the Greeks by the Romans. Some of the gold could have been brought to Queen Isabella by Columbus. It could have been looted from the Aztecs and Incas by the Conquistadores as well as captured from Spanish treasure ships by Sir Francis Drake.

A portion of the gold in the vault could have been panned near Sutter's Mill in California or discovered during the Yukon gold rush. Some of the bullion deposits could have been spirited away from Hitler's advancing armies across the Atlantic Ocean by U-boat menaced Allied convoys. However, most of the gold has a more recent and far less interesting background. Nonetheless, whatever its origin, the gold stored in the vault of the Federal Reserve Bank of New York is an impressive sight.