Does the U.S. want to revalue its gold reserves to generate revenue? Wall Street: A desperate move, the deficit is the real problem

Media reports indicate that there have been some non-mainstream speculations in the gold market in recent weeks, including the idea that the United States should reassess its gold reserves, which has attracted attention on Wall Street.

Although sources told Bloomberg News that President Trump's senior economic advisory team has not seriously considered this idea, some participants in the gold market have begun to pay attention to comments made by U.S. Treasury Secretary Scott Bessent on February 3. He stated at the time that the U.S. government would "monetize the asset side of the U.S. balance sheet" and create a sovereign wealth fund.

Revaluation Could Generate $750 Billion in One-Time Revenue

Analysts believe that the speculation in the market mainly revolves around one viewpoint: the U.S. Treasury could revalue its gold reserves at a higher price, thereby quickly raising cash for a government seeking more efficient operations. In short, the U.S. government should adjust the official price of its gold reserves from the $42 per ounce set in 1973 to the current market price, allowing the Treasury to monetize this sudden increase of about $750 billion in the balance sheet, thus reducing the need for debt issuance.

However, such a move may require approval from the U.S. Congress.

Unlike most countries, the U.S. gold is held directly by the government, rather than managed by the Federal Reserve. The Federal Reserve holds gold certificates corresponding to the value of the Treasury's gold reserves and provides the government with equivalent U.S. dollars.

At the current official price of $42 per ounce, these gold certificates have a book value of only $11 billion for the Treasury. However, as gold prices have recently reached historic highs, nearing $3,000 per ounce, if the U.S. government's gold were revalued at market price, its value would soar to over $760 billion, creating a one-time massive gain.

Direct Sale? Would Cause Political Controversy and Impact Gold Prices

In addition to simply reassessing the gold reserves, Stephen Miran, nominated by Trump to lead the White House Council of Economic Advisors, has also proposed the idea of directly selling gold. In a report last November, Miran stated that selling gold for U.S. dollars and then exchanging those dollars for foreign currencies would help strengthen what Trump considers an "undervalued" currency.

Moreover, Miran pointed out that exchanging gold for foreign government bonds could create an additional source of income for the U.S. government.

Although this operation may be legally feasible, Miran believes that selling national gold reserves to purchase foreign exchange assets could politically spark significant controversy. If the U.S. government sells part or all of its 8,133 metric tons of gold reserves, it could severely impact gold prices.

Analyst: This is a Desperate Move; The Deficit is the Real Issue

Reassessing U.S. gold reserves only requires the consent of Congress, so it is technically "entirely feasible," wrote Nicky Shiels, head of research and metal strategy at Switzerland's MKS Pamp SA, in a report. While this move would elevate gold's status in the U.S. and global markets, if this gold were subsequently sold to raise startup funds for a sovereign wealth fund, it would be extremely bearish for gold prices Zachary Griffiths, the investment-grade and macro strategy director at CreditSights Inc., stated:

“If we are facing a debt issue, this might be a viable consideration, but our real problem is the deficit.”

“Saying $800 billion to $900 billion doesn’t mean much in the long term; it sounds a bit crazy, but that’s almost the reality.”

Analysis suggests that the current fiscal deficit in the U.S. is close to 7% of GDP, which is one of the main reasons investors are flocking to the gold market seeking safe havens. This trend has driven gold prices to new highs since last year. Currently, the federal debt held by the public in the U.S. is nearing $29 trillion.

Griffiths stated,

“Trying to use ‘gimmicks’ to fill the gaps in the short-term fiscal deficit carries potential risks far greater than the short-term benefits. This looks like a desperate move, reflecting the government's unwillingness to truly address the core issue—namely, our fiscal spending and revenue are severely out of balance.”

Bank of America Merrill Lynch indicated that the revaluation of U.S. gold would impact both the Treasury and the Federal Reserve's balance sheets. Although theoretically possible, there are certain legal issues, and it may be viewed by the market as an unorthodox approach, potentially raising concerns about the independence of fiscal and monetary authorities and increasing inflation risks:

“Essentially, the revaluation of gold would simultaneously loosen fiscal and monetary policy and undermine the independence of fiscal/monetary policy. Overall, we believe the likelihood of monetizing U.S. assets is very low until U.S. Treasury Secretary Yellen provides more reliable details on how he will ‘monetize the asset side of the U.S. balance sheet.’”