We watched with great interest the comments from the White House on Feb. 3. Treasury Secretary Scott Bessent said, with President Trump looking on, that in the next 12 months the government plans "to monetise the asset side of the US balance sheet" and benefit the American people, using a combination of liquid assets and following global best practice.
Bessent’s comments came as Trump signed an executive order to create a U.S. sovereign wealth fund, and his words triggered speculation about which liquid assets the government might use for the fund.
The liquid asset we follow most closely is gold. The US holds 8,100 tons of it, the largest reserve of the yellow metal held by any government. Curiously, this gold is valued on US government books at $42.22 an ounce – the price was set by law in 1973 and doesn’t change. The current market price of gold, as we write, is around $3,000 an ounce, which makes these 8,100 tons of gold vastly undervalued.
Visiting Fort Knox
Bessent has since said he wasn’t referring to gold in those comments, but gold has come up several more times at the White House. Trump and Elon Musk have questioned the existence of gold stored at the government depositary in Fort Knox, Kentucky, with the President saying he would like to personally inspect the bullion. Bessent assured them that “all the gold is there” and cited annual audits as proof.
In Trump’s inaugural address in January, he declared the start of a "Golden Age’’ in America. It’s early days for his administration, yet its policies with regard to trade, geopolitics and the economy have already impacted precious metal prices. The gold price in dollars has touched a series of record highs in the last year, most recently last month,1 and this reflects investors seeking a safe haven asset, in my opinion.
Gold plays an important role as a strategic asset for central banks -- and individual investors -- around the world to manage risks and diversify reserves. Central banks -- China in particular -- have increased their purchases of gold in recent years. Central bank buying of the precious metal exceeded 1,000 tons for a third straight year in 2024, according to the World Gold Council.2
Clearing the debts
Most other countries other than the US value their gold reserves at market prices. If the US were to mark to market its gold reserves, they would be worth nearly $800 billion versus around $11 billion currently. The US national debt hovers around $36 trillion, with a deficit in 2024 of $1.8 trillion3, so some commentators have suggested revaluing the gold may offer a ready-made solution to inject billions of dollars of assets onto the Treasury’s balance sheet.
While we note that Bessent dismissed the notion, we think a revaluation is within the realm of possibility and would have significant implications for financial markets. For one thing, it would return gold to what we believe is its rightful position in the global financial system – that of the principal reserve financial asset. It might also force investors to reappraise their views on the nature of risk-free assets.
8-week wait for bullion
There have been reports of physical gold flooding out of London bullion vaults and into the US, with the Financial Times reporting in January that the wait to withdraw bullion stored in the Bank of England’s vaults has risen from a few days to four to eight weeks.4
These market dynamics, which led to gold travelling from London to New York in recent months ``have somewhat eased,’’ London Bullion Market Association said on March 7.
In our view, the recent moves upward for the gold price are related to its traditional role as a safe-haven asset, concern about economic growth and Trump’s trade policies, expectations that interest rates may fall and demand for the precious metal from central banks.
We are not political experts and recognise the need to tread carefully around predictions about what President Trump might or might not do. Nevertheless, as gold investors, this is one of the most interesting periods that we can remember.
Footnotes
1Past performance is no guide to future performance.
2World Gold Council, 5 February 2025. https://www.gold.org/news-and-events/press-releases/global-gold-demand-hits-new-high-prices-soar-2024
3https://fiscaldata.treasury.gov/americas-finance-guide/
4FT, 29.1.2025. https://www.ft.com/content/86a5fafd-603e-4ee1-9620-39b5f4465f53
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