Possible Gold Price Revaluation

A hot topic this month has been the idea of an official gold price revaluation from the U.S. government. We've used this space to discuss the possibility for each of the past three weeks. Let's do so again today.
Let's start with a summary of our past three updates. First, here are the links:

• https://www.sprottmoney.com/blog/on-tariffs-gold-prices
• https://www.sprottmoney.com/blog/recent-developments-gold-silver
• https://www.sprottmoney.com/blog/some-golden-speculation

U.S. Gold Repatriation and Monetization Plans

In short, here's what I believe is happening...
Since December, the U.S. has been rapidly repatriating/onshoring gold in preparation from some sort of "monetization", sometime within the next twelve months. Here again is SecTreas Bessent with his remarks alongside President Trump on February 3:

Now before we go any further, understand that Bessent was forced into what seemed like a denial of all this last week during an appearance on Bloomberg TV. When pressed regarding a "gold revaluation", Bessent stated "that's not what I had in mind". See for yourself:
US Treasury Secretary Scott Bessent says, “all the gold is there,” as he has no plans to visit Fort Knox or to revalue gold reserves in a sovereign wealth fund https://t.co/jjpfgt8acn— Bloomberg TV (@BloombergTV) February 20, 2025

Contradictory Statements and Financial Realities

That's nice. However, I think he's not being truthful. Check the other statements he makes:

• "We do an audit every year" - false
• "All the gold is there", per a report of September 30, 2024" - false
• "Any senator who wants to come and visit can arrange a visit" - false

And what if Bessent had said "yes, we plan to revalue gold sometime soon". Can you even imagine the firestorm that would have set off? What might have been the impact on price and how might that have effected the ongoing U.S. effort to onshore gold? OF COURSE he denied the revaluation plans, even as he contradicted his own statement from two weeks earlier.

The U.S. Government's Balance Sheet Crisis

At this point, let's go back to that Oval Office statement of February 3. Again...what did he say?

"We're going to monetize the asset side of the U.S. balance sheet and put the assets to work".

OK, let's start there. I'm no accountant but I do know that every balance sheet should show equal assets and liabilities. But have you ever considered the current position of the U.S. government balance sheet? You know all about the liabilities, of course. The current level of existing debt alone is about $36.5T. That debt is a liability, which must mean that the U.S. also has at least $36.5T is assets, right? Right?!? Nope. From the latest official numbers provided by the U.S. Treasury, the U.S. officially has just 5.66T in assets.
https://fiscal.treasury.gov/reports-statements/financial-report/balance-sheets.html

Putting it all together, that's a $39TRILLION hole in the U.S. government balance sheet. Since the liability side keeps worsening, something is going to need to be done about the asset side and, unless the government has plans to confiscate and/or nationalize the private sector, then they're only going to have their current assets to work with.

Potential for Gold Revaluation to Address the Crisis

Again, I'm not saying that the U.S. has to or should do this. I'm just taking the SecTreas at his word:

"We're going to monetize the asset side of the U.S. balance sheet and put the assets to work".

So what "assets" does he have to work with since revaluing gold is allegedly "not what he has in mind"? Here's another official chart from the U.S. treasury along with an AI summary:

Let's skip for now the $1.2T in "cash and monetary assets" and start with $447B in "inventory and related property". What's that? These are things like ammunition, spare parts and stockpiled military materials. Not sure how that stuff can be "monetized" so it seems that this category was not what Bessent was thinking.

• https://fiscal.treasury.gov/files/reports-statements/financial-report/2024/notes-to-the-financial-statements5.pdf

How about loans receivable? That's a full $1.75T, primarily in the form of student loans. Maybe the government could sell that pile to a collection agency at 50¢ on the dollar or something but that wouldn't even "monetize" a trillion so that's likely out, too.

• https://fiscal.treasury.gov/files/reports-statements/financial-report/2024/notes-to-the-financial-statements4.pdf

How about Property, Plant and Equipment? That's 1.3T in assets. Could Bessent do something there? But how do you monetize buildings, software and office furniture? That also seems like a stretch.

• https://fiscal.treasury.gov/files/reports-statements/financial-report/2024/notes-to-the-financial-statements6.pdf

Which brings us back to category #1...Cash and Other Monetary Assets.

• https://fiscal.treasury.gov/files/reports-statements/financial-report/2024/notes-to-the-financial-statements2.pdf

Limited Cash and Monetary Assets for Monetization

What does Bessent have to work with here? Well, there's $947.3B in cash but cash for operations is not really something you can "monetize". And so, after eliminating pretty much everything else...buildings, student loan, spare parts, etc...we're left with gold and silver. How much? Again, in the latest update from Treasury:

Fiscal Urgency and the Need for Drastic Measures

In summary, if we are to take Bessent's statement of February 3 as honest, then we can't help but take his Bloomberg appearance of February 20 as dishonest. If the Trump administration really does sense that the fiscal situation is dire, they're going to need to take some drastic measures.
Truer words have never been said. The next crisis will make 2008 look like a minor correction.

Revaluing Gold as a Potential Solution

Revaluing and monetizing the gold on the balance sheet would seem to be about the only option and Bessent was seemingly hoping to buy some time by denying that a revaluation "was what he was thinking" last week.

Future Considerations for a Sovereign Wealth or Sinking Fund

Next week, let's discuss how a revaluation could fund a sovereign wealth fund or perhaps even a "sinking fund" for retiring some existing debt. For now, though, I hope this latest post has helped you to think through the possibilities, in spite of Bessent's attempt to put the revaluation genie back into the bottle.

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