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June
15
2017

The Strange Secret History of Operation Goldfinger
James Ledbetter

In September of 1965, Joe Barr, a Treasury Department official with a long history in government, agreed to meet with a group of members of Congress from Western states. He knew what to expect. Earlier that year, he had met with the same group, and endured its ire over the Treasury’s reluctance to help the American gold industry. After the Second World War, world leaders had met at Bretton Woods, in New Hampshire, and, as part of an agreement on an international monetary system, had fixed the price of gold at thirty-five dollars an ounce. This had, predictably, depressed the U.S. mining industry, even as the demand for private gold shot up. The more easily obtained sources of gold had been depleted over the years, while harder-to-reach sources became more difficult to mine profitably, given the static price. Foreign competition—chiefly from Canada and South Africa, where mines were less depleted and labor costs were lower—was far more intense by 1960 than it had been after the war, when the price of gold was set. The United States was a distant third in gold production. Rather than attempt to compete, many mines simply shut down.

Politicians from Western states, where most gold was mined in the U.S., considered this an economic crisis, and by 1965 they had lost their patience. Nineteen Senators—including influential Democrats like Frank Church, Henry (Scoop) Jackson, Warren Magnuson, and George McGovern—signed a blunt letter to President Lyndon Johnson accusing him of letting America’s gold industry die. Gold, they said, “is the only commodity held down to a price established 31 years ago and compelled to sell only to the imposer of this strangling restriction—the Federal government.” (Since the nineteen-thirties, Treasury was the only domestic entity that could legally buy investment gold.) Badly needed reform, they added, was being blocked by Treasury’s “negative attitude.” These words were just short of a threat that the senators would take action on gold with or without the Administration’s support. It was in this atmosphere, which Barr described as “more heated than usual,” that he trekked to Capitol Hill that September day. Barr later said that at the meeting he had “a stroke of inspiration.” Instead of maintaining the government’s hard line, he suggested that “possibly the Government could assist in this area by some sort of an R&D approach in the discovery of deposits and in the extraction processes.” It wasn’t the price increase the Western senators hoped for, but it pleased them nonetheless.

Barr and a colleague then went to see Donald Hornig, who was Johnson’s science and technology adviser and one of the most accomplished American scientists ever to occupy a position of political power. Hornig had worked on the Manhattan Project. He also worked on the space program and was an expert in ocean-desalination technology. Responding to Treasury’s inquiry about gold research, Hornig asked the Geological Survey and the Bureau of Mines for a study, and word came back that, yes, “there is indeed an opportunity to secure significant quantities of additional gold production in the United States within the $35 an ounce price limitation.” The solution seemed simple enough: deploy state-of-the-art technology to detect gold and then extract it.

Thus began a strange, untold episode in modern American history. In the mid-to-late nineteen-sixties, as gold’s role in the international monetary system was about to implode, a handful of top Johnson Administration officials, a few sympathetic members of Congress, and hundreds of government-paid scientists set off on a nuclear-age alchemical quest. Barr gave it the code name Operation Goldfinger. The government would end up looking for gold in the oddest places: seawater, meteorites, plants, even deer antlers. In an era during which people wanted badly to believe in the peaceful use of subatomic energy, plans were drawn up to use nuclear explosives to extract gold from deep inside the Earth, and even to use particle accelerators to try to change base metals into gold.

Operation Goldfinger represented the logical culmination of a government obsession with not having enough gold. The post-war global economy was expanding much faster than the gold supply that propped it up. Dollars freely convertible to gold were the underpinning of the world’s monetary system, and President John F. Kennedy—and many others—feared that if holders of dollars and other U.S. securities were to cash in their paper for gold, there wouldn’t be enough gold to exchange, and a global crisis could ensue. In a private 1962 conversation with the chairman of the Federal Reserve, Kennedy framed the shortage of monetary gold starkly: “My God, this is the time . . . if everyone wants gold, we’re all going to be ruined because there is not enough gold to go around.”

Against such fears, which continued through the Johnson Administration, Goldfinger’s promise was irresistible. If the predictions made by Hornig and Treasury officials in early 1966 were to come true, the initial investment of a few million dollars would, in just a few years, look like the bargain of the century. A sunny Hornig wrote to President Johnson in February, 1966, “It appears by spending from $10 million to $20 million per year we stand a good chance of adding several billion dollars to our gold reserves at the present price. With luck it might be much more.” Treasury’s general counsel asserted that “the President’s scientific advisers are confident of the success of the program [and] estimate that new gold reserves valued at up to $10 billion could be expected within five years.” That amount—ten billion dollars—was more than five times the volume of gold then produced annually worldwide. Goldfinger, to its enthusiastic backers, wasn’t like discovering some new gold mine—it was like discovering a new planet.

While the Johnson Administration sparred with Congress over seemingly basic issues like passing a tax bill, there was nonetheless consensus between the executive branch and a handful of congressmen to disguise Operation Goldfinger as a broad-based metal-mining program. There were several motivations for secrecy: no actual funds, for example, had been appropriated for government gold-hunting. A push for secrecy also came from the Federal Reserve chairman William McChesney Martin, who was concerned that “we simply do not know how foreign central banks would interpret this move.” As Barr wrote to his boss, the Treasury Secretary Henry Fowler, “There is general agreement among those I talked to that this program should be wrapped up in a search for all minerals. They advised us (the Treasury and the Administration) to deny or refuse to comment on any leaks . . . and to stick with the cover story of a search for minerals in short supply in the United States.”

Operation Goldfinger took the form of hundreds of research projects designed to find gold in places likely and very unlikely. The Roberts Mountains in north central Nevada had long seemed like a promising source of gold, and samples from dozens of areas were taken to search for surface minerals (such as limestone) known to be associated with gold deposits. Other studies were long shots. For decades, various scientists had found traces of gold in coal, and so the U.S. Geological Survey sifted through coal in dozens of locations in Appalachia and the Midwest. The government even took samples from coal ash and “coal-washing waste products received from various industrial plants.” These did not yield gold bonanzas. In the nineteen-forties in Czechoslovakia, scientists reported finding gold in the herb Equisetum palustre, or marsh horsetail. When government scientists collected twenty-two samples from across the United States, however, they found gold concentrations well below one part per million, and concluded, “Equisetum would not be useful in prospecting for gold.”

Much of the project’s early enthusiasm was turned loose on funding state-of-the-art gadgets. The U.S.G.S. developed truck-mounted neutron-activation systems, one for detecting silver and one for gold. “It is no longer necessary even to collect a sample, as long as a truck can be driven over the spot that one wants analyzed,” a government report boasted. The Bureau of Mines also worked on “a portable X-ray probe that can be lowered into small diameter drill holes” to find gold. James Bond would have been proud.

For Operation Goldfinger, no scientific plan was too obscure to consider: Is there gold in meteorites that hit the Earth? Is there gold in Colorado peat? Is there gold in plants and trees? Is there gold in deer antlers? In almost all cases, government scientists found that the answer was yes—but not at quantities that even approached commercial viability.

The ocean seemed an especially promising area of exploration. The same geological forces that created gold deposits in, say, California, were also at play under the ocean floor, and preliminary sea-mining for gold was among the most important projects under Operation Goldfinger. The U.S.G.S. contracted with the University of Oregon, in 1967, to launch the Yaquina, a research vessel designed to dredge sediment beneath the continental shelf between Coos Bay, in Oregon, and Eureka in northern California. The project, however, turned up minuscule amounts of gold.

Operation Goldfinger’s ambitions did not stop at U.S. shores. An outside economic adviser named Alexander Sachs managed to convince top Johnson Administration officials to take seriously a plan to mine in Venezuela for gold. Eugene Rostow, the State Department’s undersecretary of political affairs, asserted to Treasury that “there is evidence of high promise to justify a full feasibility study. . . . I suggest a Public Corporation or Authority established by a Treaty between Venezuela and the United States.”

Rostow’s suggestion of international coöperation was all the more remarkable because Sachs recommended not merely traditional gold mining but prying gold out of the Venezuelan ground using nuclear detonations. During the nineteen-sixties, many such experiments with underground nuclear explosions were proposed—some were even carried out—primarily for mining, drilling and land-moving purposes, under the auspices of Project Plowshare, a program for the peaceful use of nuclear technology. From Plowshare’s inception, in 1957, to its eventual demise, two decades later, at least two dozen nonmilitary nuclear detonations were carried out. The Venezuelan plan, however, never went forward.

Perhaps Goldfinger’s most wide-eyed plan was to create gold out of other substances. For hundreds of years, alchemists suspected that some metals were structurally close enough to gold to be transformed into it, using an elusive external process. Many scientists recognized that the nuclear age had, in theory, provided the tools, and Sachs managed to convince both Fowler, the Treasury Secretary, and Stewart Udall, the Interior Secretary, to take up the modern alchemical cause. Fowler wrote to the chief of the Atomic Energy Commission, Glenn Seaborg, “Because of the implications of Dr. Sachs’s proposal for, among other things, the present vexed international monetary situation, I am extremely anxious that [an] assessment be made—and in the swiftest possible time.” Seaborg acknowledged that “other elements near gold in the periodic table can indeed be transmuted into gold by nuclear reactions,” but he also knew the atomic science well enough to recognize that gold production by this method would be ludicrously expensive, and he shot the plan down.

What became of Operation Goldfinger? Most of the initial experiments were one-offs. Some ideas—such as the reopening of a viable gold mine in Cortez, Nevada—showed some success. Other projects were directionally valid over the long term; Guyana and Venezuela, for example, produce substantially more gold today than when Operation Goldfinger was eying them in the late nineteen-sixties.

The plans to use nuclear detonation for gold mining never became reality. By the early nineteen-seventies, most government scientists had scaled back their attempts to use nuclear detonations for earthmoving or mining; opposition from activist scientists and the public became pronounced, particularly as details of radioactive fallout were made public.

In 2014, I interviewed Francis Bator, an economist who worked in the Johnson Administration and closely advised the President on international monetary policy, about Operation Goldfinger. He implied that most of his colleagues did not believe it would ever be a serious solution to the monetary-gold shortage. “It was a gimmick. It was a sideshow,” he recalled. At best, Bator said, Operation Goldfinger was designed as a show of force, a psychological attempt to ease world markets by hinting that the United States could tap new sources of gold if need be. These efforts might serve to buy some time while the economists and diplomats in the Administration could find a palatable way to decouple the dollar from gold.

By 1968, Operation Goldfinger had indeed acquired a propagandistic aspect. While the project had begun in secrecy, results of individual projects were trotted out on occasion for effect. For example, the Bureau of Mines made a public announcement in March, 1968, about a “major technical breakthrough” that would dramatically increase the amount of gold produced in the U.S. The technique, an “aqueous chemical treatment” allowing more gold to be extracted from certain ores, was promising, but had only been executed in a Reno research lab; under the best of circumstances, it was years away from commercial impact.

What determined Operation Goldfinger’s fate, however, was not its lack of results but the course of world events. The devaluation of the British pound in late 1967 set off a series of gold-supply crises so threatening to the global economic order that no one in the Johnson Administration could afford to spend time thinking about how much gold was contained in deer antlers. “In ’67, when the British got in all this difficulty, everybody all over the world said, ‘I don’t want to hold paper money; I want to hold gold,’ ” Barr later recalled. “We had to meet these commitments, and we were losing gold at an enormous rate. So were all our partners. Everybody was terrified, and the markets were just convulsed all through late ’67 and early ’68. We couldn’t pass a tax bill in the United States. The British had devalued. Everybody was just petrified.” The long-feared currency crisis had begun. Within a few short years, the Nixon Administration would be compelled to drop the gold standard altogether, embracing what L.B.J.’s advisers had rejected as “the nuclear option.” The transition, in 1971, to a dollar untethered to gold was hardly smooth. But the long-term consequences were probably healthier than sticking to a monetary system that made gold-mining nuclear detonations seem like a good idea.

This article was adapted from “One Nation Under Gold: How One Precious Metal Has Dominated the American Imagination for Four Centuries,” by James Ledbetter, published this month by Liveright, a division of W. W. Norton.

 

James Ledbetter, before joining Inc., was the Opinion Editor of Reuters. He was the founding editor of Slate's financial site The Big Money, deputy managing editor of CNN Money, and has published five books.

www.newyorker.com