Eleven Billion Dollars of Gold

The United States government owns 261,498,926 fine troy ounces of gold, about 8,133 tonnes. On the Treasury's own books that holding is carried at 42.2222 dollars an ounce, a price fixed by statute in 1973, which values the entire national gold reserve at 11,041,059,957 dollars and ninety cents.

At the market price the same metal passed a trillion dollars in early August and is worth something over 1.1 trillion today. The difference between the two numbers, roughly 1.1 trillion dollars, is not a valuation dispute or an estimate. It is a line in a statute that nobody has amended in fifty three years, sitting on the balance sheet of the largest borrower in the world while that borrower pays close to a trillion dollars a year in interest.

Washington has noticed. Treasury Secretary Scott Bessent said in February last year that the administration intended to monetise the asset side of the United States balance sheet for the American people. No formal proposal has followed, and no legislation to revalue has been enacted.

The Historical Echo

It has been done once, and the mechanics are worth understanding because they are not what most people assume.

President Roosevelt signed the Gold Reserve Act on the thirtieth of January 1934. By proclamation the following day the official price of gold went from 20.67 dollars an ounce to 35, a devaluation of the dollar against gold of about forty one percent. The government did not buy or sell a single ounce to achieve this. It changed the number.

The accounting consequence was immediate and enormous. The Treasury's gold holdings, unchanged in weight, were suddenly worth far more in dollars, and Section 10 of the same act put two billion dollars of that paper profit into a new Exchange Stabilization Fund under the direct control of the Secretary of the Treasury.

That is the precedent, and it is also the limit of it. Marking up the gold certificates the Treasury holds at the Federal Reserve today would credit the Treasury's account with the difference without a single ounce leaving a vault, and it would not change the market price of gold by one cent, because the market stopped taking instruction from the official price in 1971. It is a bookkeeping entry with a real cash consequence for the issuer and no consequence at all for anyone holding metal.

Where Patient Capital Is Positioning

Running alongside the revaluation conversation is a quieter one about whether anybody has counted the gold recently, and it is the more interesting of the two.

Representative Thomas Massie introduced the Gold Reserve Transparency Act in June last year and Senator Mike Lee introduced a Senate companion that November. The Senate bill would require a full audit and inventory by external third party auditors within nine months of enactment and every five years after that, an assessment of physical security, and something that has never been published: a full accounting of any encumbrances arising from leases, swaps or similar transactions over the past fifty years.

The Treasury's position is that the gold is audited. Its Inspector General has overseen an independent annual audit since the 1993 fiscal year, with an outside accounting firm doing the work since 2005, and testimony in 2011 stated that all 42 storage compartments had been inventoried, audited and placed under official joint seal by the end of the 2008 fiscal year.

What can be said plainly is the order of operations. You cannot sensibly revalue what you have not verified, and the encumbrance question is the one that matters for anybody thinking in terms of physical ownership. An ounce that has been lent, swapped or pledged is still an ounce, and it is still in the vault, and it is no longer unambiguously yours. That distinction between a holding and a claim is the oldest subject this letter has, and it applies to sovereigns exactly as it applies to families.

The practical consequence for a household holding metal across generations is smaller than the headline numbers suggest and more useful. A revaluation would be an accounting event for the Treasury and a non event for the market. An audit would be the opposite: it would settle, for the first time in decades, how much of the largest official hoard on earth is unencumbered. Until somebody counts, the honest position is that the tonnage is known and the ownership is asserted. Which is why the metal worth having is the metal whose chain of custody is short enough to check yourself.

The Capital Memo