(Bloomberg) — The gold market attracts its share of fringe ideas, and in recent weeks one of them — that the US should revalue its gold stockpiles — has gripped Wall Street.
Most Read from Bloomberg
The idea isn’t under serious consideration among US President Donald Trump’s top economic advisers, according to a person familiar with the matter.
Nevertheless, some gold market participants have taken their cue from Feb. 3 comments by Treasury Secretary Scott Bessent that the government would “monetize the asset side of the US balance sheet” and create a sovereign wealth fund.
The speculation centers around the idea that the US Treasury could re-peg its gold holdings at a higher level, a move that would generate quick cash for a government eager to run more efficiently. In summary: The US government should revalue its gold reserves from the $42-an-ounce set in 1973 to current prices, allowing the Treasury Department to monetize the sudden balance-sheet boost of about $750 billion, thereby reducing the need to issue bonds.
Such a move would likely require approval from the US Congress.
Unlike most countries, the US’s gold is held by the government directly rather than the Federal Reserve. The Fed holds gold certificates corresponding to the value of the Treasury’s holdings, and credits the government with dollars in return.
At the current official price of $42 an ounce, those certificates are worth $11 billion to the Treasury. But gold has been soaring to repeated record highs of late — approaching $3,000 an ounce. If the US government’s gold was marked-to-market, that would surge above $760 billion, creating a one-time windfall.
Beyond simply revaluing the US’s gold stocks, Stephen Miran, Trump’s nominee to lead the White House Council of Economic Advisors, has floated the idea of selling the stash. By selling the gold for dollars, and then exchanging those dollars for foreign currencies, the administration would strengthen “undervalued” currencies, an outcome Trump has signaled he wants, Miran wrote in a November report. Swapping bullion, which does not yield interest, for foreign government bonds would also create an additional income stream for the government, he added.
While it’s probably statutorily permissible, selling national bullion reserves to buy foreign exchange instruments could be politically costly, Miran wrote. Offloading even a portion of the 8,133 metric tons of gold held by the US government would likely hurt gold prices.
