The Ripple Effect: How an Official US Gold Revaluation Could Reshape the Economy

The official U.S. gold reserve, totaling 260 million ounces, is currently valued on the Federal Reserve’s balance sheet at just $11 billion—an outdated valuation of $42.22 per ounce. Given that the market price of gold is closer to $2,950 per ounce, the actual market value of this reserve is closer to $770 billion. Speculation has been growing that the Fed might re-price gold to reflect its true market value, a move that could have significant economic and financial implications.

What Would Happen if the Fed Revalued Gold?

If the gold reserve were officially revalued at market prices, the Fed’s balance sheet would see an asset appreciation of approximately $750 billion. The likely mechanism for this revaluation would involve crediting an equivalent amount to the Treasury General Account (TGA), effectively creating $750 billion in new liquidity that the federal government could spend. This would immediately expand the money supply, injecting fresh capital into the economy. As these funds flowed from the government to commercial banks and businesses, bank reserves would also see a significant boost.

In the short term, such a monetary injection could act as an economic stimulus, delaying a recession and potentially supporting the stock market. However, gold itself may not necessarily benefit unless it behaves as a pro-cyclical asset.

The longer-term effects, however, would be more complex. Increased liquidity would likely drive inflation higher, pushing up long-term interest rates. Additionally, the Fed might counteract the inflationary effects by extending its quantitative tightening (QT) program, effectively draining some of the newly created liquidity from the system.

Timing Considerations and Political Implications

From a political standpoint, the timing of such a revaluation would be critical. If the objective is to maximize its economic boost, implementing the revaluation in the final year of a presidential term—such as 2028—would make more sense than doing so in 2025. An economic stimulus right before an election could be a strategic move to bolster economic sentiment.

Further dampening speculation that this move is imminent, U.S. Treasury Secretary Scott Bessent recently clarified in an interview that revaluing the gold reserve was not what he had in mind when discussing balance sheet monetization. While he did not outright dismiss the idea, his comments suggest that any gold revaluation is not a priority at the moment.

Given these factors, it is unlikely that the official gold reserve will be revalued in the next few months. Instead, such a move would more likely occur as part of a broader stimulus package during the next economic downturn or in the lead-up to the 2028 election.

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