I noticed yesterday that gold has soared above $5200 per ounce, yet the U.S. government’s gold stockpile is still booked at a mere $42 per ounce, making up over $11B at that low price.
The Fed holds gold certificates* so it effectively owns this gold, and its gold certificate account makes up part of the asset side of its balance sheet, thereby making up a very small part of the collateral against which Federal Reserve Notes are issued. (Bullion coins, as I understand it, are not minted from this stockpile; instead the Mint procures the gold for that purpose from the open market.)
So what would happen if it was decided to value the gold stock at its market value of $1T? It’s currently a bit more than that, but $1T is good round number.
What would the fiscal results of this be with regard to inflation and the USD exchange rate?
Would inflation diminish, and the dollar rise in value because it would have more “backing”, even if said increase is comparatively miniscule?
Would inflation increase on the assumption that the government would now be enabled to spend more?
Or would there be some totally different result?
And a bonus question: Do other countries typically book their gold stockpiles at far below market value? Or not at all, simply regarding it as a valuable strategic asset without assigning it a monetary value?
*Just book entries now, not the real paper certificates
An additional question - does it really matter? The US national debt is about $38.9T so how much of a difference would it make to call it $37.9T?
Recall during the shutdown threats when Biden was president, there was a discussion of minting a $1T coin to carry on the work of government. “Look, we have $1T in cash, we can keep spending!”
My completely non-economist opinion - Inflation usually is a result of too much money circulating, so saying “oh, we have $1T more in the bank” has no effect unless it results in even greater spending. there may be some adjustments in the market allowing for this possibility, but in general, if it’s business as usual spending-wise, it would be business as usual inflation-wise.
The real question would be, what if they start selling those gold reserves, adjusted beforehand or not? My off-hand guess, less debt floating around, interest rates on bonds get lower, etc.
I agree it’s a worthwhile question, but from what I gather, not being an economist but just hearing the news, it seems that perception is everything. The USD might be perceived to have that tiny bit more of gold-based value.
Most economists will agree that the current prices of everything, including the price of a dollar, already reflect all publicly available information. This information is already publicly available. A change in accounting methodology like this should not have any effect on supply and demand and price.
For tin-pot nations, inflation results from printing money. Since there’s not enough to pay for all the crabs legs, lobsters, and fruit baskets, or civil servants and tanks, they print money instead. When the rest of the country sees there is plenty of money for those paid by government, they raise their prices to get a share of that and compete for goods with well-paid government types, resulting in all aorund inflation.
The USA does not do this. Instead, they issue government bonds to make up for shortfall revenues. (Essentially borrowing against next decades’ tax revenue). The interest rate is seen as the market’s calculation of factors before the bond matures, like the anticipated inflation, future tax revenue from the nation’s economic activity, odds of being paid back, odds of bond rates in future that may be better or worse, etc.
As Saffer mentions, odds are that buried in that calculation is the option of the USA selling it’s gold reserves if it really had to, and - obviously - at current market value. Whether it’s on the books now at the current value is a trivial issue.
The only time I’ve seen the book value an issue, was with some old traditional corporations. A&P and Greyhound come to mind. generally accepted accounting principles said to carry assets on the books at their purchase value. Those companies carried their properties at book value, despite having acquired downtown properties at 1930’s prices. By the 1980’s the share price did not reflect massively increased property values, making a takeover lucrative when those properties were sold.
I say nothing would happen. The uses the US government have for gold are marginal, limited to commemorative coins. The US went off the gold standard during the Great Depression and suspended all convertibility in 1971. There’s no reason the markets should or would care about this.
There are occasional proposals to sell off a share of US gold holdings. But that’s neither here nor there for the OP.
Inflation would not change. The exchange rate would not change.
Here’s a question: who is making the change in valuation or is calling for it? Is it the President? The Secretary of the Treasury? The Chair of the Federal Reserve? And moreover, why are they doing it? I can imagine the markets moving by a small amount if they thought that the shift in policy cast light on future policies that actually matter. So if the President is prepping the markets for a sale of gold, perhaps that’s a signal that he’s less serious about the underlying budget deficit of the US. This would only matter in a context where the deficit trajectory was unclear.
Maybe there would be a way that a daily move in the market could be attributed to this policy announcement. In the press. I suspect though that the move would be too small to distinguish from the daily noise, meaning the effect may not existed in the first place.
A sale of gold probably would not affect interest rates or the money supply, because the Fed targeting of interest rates, with purchases and sales of bonds if necessary (or just the setting of the fed funds bracket) would counteract any such pressures.
When we came off the full gold standard 1n 1933, the USD was officially defined ro be equal 1/35 of an ounce in value, which was maintained until the late '60s; then the USD’s value was reduced to 1/42 of an ounce.
A few years after that the USD was dissociated from gold altogether, but ever since then, the Treasury as continued to book its gold stock at $42/oz, now an absurdly low rate.
Revaluing gold stock was a major political issue in Germany in 1997. German gold reserves, the second largest stock in the world after the US, are not held by the Ministry of Finance (the equivalent to the Treasury) but by its central bank, Bundesbank (which I’ve worked for, though not at that time). These gold reserves had been amassed during the Bretton Woods era as a result of Germany’s long-term current account surpluses, and had, consequently, always been valued at the Bretton Woods price of $35 an ounce.
In 1997, the government put pressure on Bundesbank to revalue them at market prices. The idea was that this would generate a one-off profit for Bundesbank, and since Bundesbank’s profits are disbursed as a dividend to the federal government. This would have been inflationary since the funds paid out by Bundesbank to the Ministry would have been newly created deutschmarks, so Bundesbank resisted the idea. Ultimately, a compromise was struck whereby Bundesbank agreed that gold reserves would be booked at market value but profits generated as a consequences would not feed into the government dividend.
I’m glad you brought this up; it’s interesting to learn that the idea has been considered in another country. One thing to remember regarding commodities like gold is that their values fluctuate; today it’s come down several hundred USD/ounce from the time when I first posted this thread. So it could become complicated if a central bank has to constantly adjust the gold account due to daily changes.
IIRC in the United States the Treasury, a department of the executive branch, maintains physical custody of the gold, but it technically belongs to the central bank, as reflected by its “gold certificate account”. Early on, the certificates were physical paper in the form of currency, including the famous Series 1934 $100,000 denomination, but today they’re just electronic book entries.
Another country to take into account is Italy. As recently as November 2025 Italian lawmakers “have reignited calls to assert state ownership over the Bank of Italy’s substantial gold reserves, proposing their potential sale to alleviate the nation’s staggering public debt.” This article gets into some details: https://markets.financialcontent.com/talkmarkets/article/marketminute-2025-11-19-italy-reignites-gold-debate-amidst-debt-crisis-while-imf-eyes-global-aid
Reading that my first question concerning the OP would be: Who owns the gold he is talking about? Who is “the government”? The FED? Sure not, it does not play the same role the Bundesbank does in Germany, as Schnitte pointed out. At least I think it does not. Fort Knox? Is it not under the Department of Defense/War/War Crimes’ autority? Oh dear! The IRS? I don’t think so, but I don’t know.
It is not the only question the article raises, but it is not bad for a start.
ETA: And just before this debate was initiated in Italy the mood among financial observers (whoever those are) was bullish for Italy’s stance on hoarding gold and never selling it.
Reuters wrote the same, and many others jumped up that bandwagon. That is what Reuters does for a living.
ETA 2: And if you want international comparisons the Federal Reserve Board has this to add to the debate:
IIRC the U.S. government, specifically the Department of the Treasury, has physical custody of this gold, but the Federal Reserve banks hold the same amount in their gold certificate account. Effectively this means the Federal Reserve banks own the gold and the Treasury is just warehousing it for them.