At the beginning of February, the new U.S. treasury secretary, Scott Bessent, announced that the U.S. government would “monetize the asset side of the U.S. balance sheet” over the next 12 months. This statement, made in the context of financing a new sovereign wealth fund, sparked speculation that the government might consider revaluing its gold reserves – a move that could have far-reaching consequences for financial markets and the price of gold.
Gold Revaluation and Its Potential Impact
The U.S. gold reserves are currently valued at an outdated statutory rate of $42 per ounce, a figure set in 1973. If the Treasury Department revalued these reserves to reflect current market prices – approximately $2,800 per ounce – it would result in a significant increase in the U.S. Treasury’s assets, potentially adding around $800 billion to the Treasury General Account (TGA). Such an injection of capital could reduce the need for additional issuance of government bonds, although it would only cover less than two months of government spending, which exceeds $7 trillion annually.
Financial markets reacted swiftly to these speculations, with gold prices surging toward $3,000 per ounce. Investors and analysts are now evaluating the likelihood of such a move and its broader implications for monetary policy, inflation, and fiscal independence.
(Jewellery Quarter Bullion, 2025)
A graphical analysis of gold price movements shows a sharp increase in early February, when U.S. Treasury Secretary Scott Bessent’s statement about monetizing the asset side of the U.S. balance sheet fueled speculation about a potential gold reserve revaluation. Such a move could have significant and long-term effects on financial markets and drive gold prices even higher.
Three Possible Paths for Monetizing U.S. Assets
To better understand Bessent’s remarks on “monetizing U.S. assets,” Mark Cabana from Bank of America examined various components of the balance sheet that could be valued or sold. He identified three primary options:
The U.S. government owns more than $1.3 trillion in tangible assets, with the Department of Defense (DoD) controlling nearly 65% of these holdings. However, selling PP&E is unlikely due to national security concerns and the complex process requiring congressional approval. Additionally, revenue from such sales would have to be balanced against government expenditures, meaning this approach would not necessarily reduce the budget deficit.
The U.S. government holds significant stakes in government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac, amounting to approximately $339 billion in preferred shares at the end of fiscal year 2024. Selling these stakes to private investors could generate revenue, but the privatization process would take more than a year, conflicting with the urgency signaled by Bessent. Moreover, government guarantees for mortgage-backed securities present an additional obstacle to executing this scenario.
Among all options, gold revaluation appears to be the most efficient. The U.S. government currently holds $11.1 billion in gold and silver reserves, but this value is based on an outdated statutory price. If these reserves were revalued at current market prices—around $688 billion— it would significantly increase the Treasury’s assets. However, legal uncertainties remain regarding whether the Treasury Secretary has the unilateral authority to adjust gold’s official value. The law governing gold certificate valuations (31 USC 5117) includes a provision allowing for presidential approval to adjust the valuation. Still, it is unclear whether this could be used to revalue gold to its market price.
Implications for Monetary and Fiscal Policy
A gold revaluation would have profound effects on both the Treasury’s and the Federal Reserve’s balance sheets. The Treasury’s assets would increase to reflect the new gold valuation, while liabilities would also rise due to the issuance of additional gold certificates to the Federal Reserve. Simultaneously, the Federal Reserve’s balance sheet would expand, as these certificates would be recorded as assets, and funds would be transferred to the Treasury General Account.
This measure would inject substantial liquidity into the financial system, potentially triggering inflationary pressures and altering interest rate dynamics. Additionally, it could undermine the perception of monetary policy independence, as it would be viewed as an unconventional fiscal stimulus.
The U.S. has not revalued its gold reserves in decades, likely to avoid market instability and to maintain a clear distinction between fiscal and monetary authorities.
Implications for Gold and Global Markets
Despite uncertainty, speculation about gold revaluation has already impacted global markets, with gold prices climbing toward $3,000 per ounce. Analysts remain divided on the likelihood of such a move.
Bank of America believes the probability is low, citing legal barriers and concerns about market stability.
However, Trump’s administration is known for fast and disruptive policy decisions, increasing the chances of a surprise gold valuation shift.
If gold revaluation were to occur, its effects would extend far beyond government finances. A higher official gold price would likely drive precious metal prices higher and benefit assets like Bitcoin and other commodities, which could also be reassessed in value. At the same time, global investors would re-evaluate their confidence in U.S. debt and the dollar’s stability, should such an unexpected policy shift take place.
Fannie Mae (Federal National Mortgage Association – FNMA) and Freddie Mac (Federal Home Loan Mortgage Corporation – FHLMC) are U.S. government-sponsored enterprises (GSEs) that play a critical role in the mortgage-backed securities market. Fannie Mae was established in 1938 under President Franklin D. Roosevelt’s New Deal program to increase mortgage accessibility and liquidity in the housing market. It does so by purchasing mortgages from banks and lenders and securitizing them into bonds for investors. Freddie Mac, founded in 1970, was created to increase competition with Fannie Mae and improve mortgage financing accessibility. Like Fannie Mae, it buys mortgages, securitizes them, and sells them on the secondary market, ensuring greater liquidity in real estate financing. Both institutions have played a key role in stabilizing the U.S. housing market and ensuring affordable mortgage access. However, during the 2008 financial crisis, Fannie Mae and Freddie Mac suffered massive losses, leading to a government bailout and federal control.
