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