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Suddenly even the Financial Times can muse about gold revaluation
But it's not really a new idea at all. Seventeen years ago a former member of the Federal Reserve's Board of Governors, Lyle Gramley, remarked on Canadian television that revaluing gold could quickly strengthen the U.S. government's financial position:
https://www.gata.org/node/6989
Of course the FT and the rest of the mainstream financial news organizations took no notice of it.
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Gold Glitters as the Unimaginable Becomes Imaginable
By Gillian Tett
Financial Times, London
Friday, February 7, 2025
Another week, another record high for the gold price. Cue wild celebration among goldbugs -- and frantic speculation from everyone else about the reason for the explosion in demand for the precious metal.
Geopolitical turmoil is one obvious explanation. Inflation concerns amid insane tariff dramas is another. However, there is a third, less noticed, issue bubbling away too: some hedge fund contemporaries of Scott Bessent, the hedgie-turned-U.S. Treasury secretary, are speculating about a revaluation of America's gold stocks.
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Currently these are valued at just $42 an ounce in national accounts. But knowledgeable observers reckon that if these were marked at current values -- $2,800 an ounce -- this could inject $800 billion into the Treasury General Account, via a repurchase agreement. That might reduce the need to issue quite so many Treasury bonds this year.
This week such chatter intensified after Bessent both pledged to "monetise the asset side of the U.S. balance sheet" -- in other words, to focus on assets as much as liabilities while also promising to lower 10-year Treasury yields.
"Re-marking ... to current market value would mechanically deleverage the U.S. balance sheet," says David Teeters of IESE business school, who notes that if gold prices keep rising, this potential blessing swells. Or as Larry McDonald, a libertarian analyst, notes: "It is time to get creative around ... Uncle Sam's balance sheet."
Will this ever happen? I don't know. Nor, I suspect, does Bessent, since it is the ever-capricious Donald Trump who sets policy. But the fact that this wild speculation is swirling underscores three key points. ...
First: Investors know that Bessent has an incentive to be creative, given the scary fiscal hole. House Republicans are mulling a massive tax and spending bill that would add "up to $5.5 trillion of net primary deficit increases" and "boost interest costs by about $1.3 trillion over the next decade" according to the Committee for a Responsible Fiscal Budget. That could spark bond market alarm this spring, if not a congressional revolt from populist nationalists.
And that hole cannot be plugged just by smashing a tiny agency like USAID (a grotesque move), or letting Elon Musk halt federal payments (also outrageous). "While there are potential cost savings, the only way to create fiscal responsibility is with substantial tax increases," argues Robert Rubin, former Treasury secretary.
Second, Bessent needs currency tricks as well as fiscal ones. As JD Vance, the vice president, told Congress last year, Trump's cabal considers the dollar to be wildly overvalued -- to the degree that it is hollowing out the country's industrial base. They attribute that to its reserve currency status.
But while they would prefer a weaker currency, Trump also wants to retain that global dollar dominance, and Bessent himself knows that tariffs will probably strengthen its value.
That makes their policy seem bizarrely contradictory. But some market commentators, such as Luke Gromen, think the contradiction could be resolved if the Treasury tolerated, or enabled, gold to keep surging against the dollar. "Gold is likely to be a key pivot [for] the new system the Trump administration is clearly trying to engineer," he says. ...
... For the remainder of the commentary:
https://www.ft.com/content/f6459ed1-8a65-4d89-8bd8-40e8546912f0
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GATA is grateful to these companies for their recent support:
Apollo Silver Corp.
Barksdale Resources
Dolly Varden Silver Corp.
Dryden Gold Corp.
Group Eleven Resources
Guanajuato Silver
IBK Capital Corp.
Independent Trading Group
Mining Discovery
Power Nickel
Silver North
Strike Point Gold
The National Investor
The Prospector
Western Alaska Minerals
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