The valuation of gold reserves has surpassed one trillion yuan. When will the U.S. “use gold to monetize its debt,” which would be equivalent to $990 billion in quantitative easing?

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The market value of U.S. gold reserves has surpassed $1 trillion for the first time, reigniting market speculation that the United States may revalue its gold reserves.

Since the beginning of this year, the price of gold has risen by 45%. The valuation of U.S. Treasury gold reserves has surpassed $1 trillion for the first time in history, sparking renewed market speculation that Treasury Secretary Bessent may revalue these precious metal assets.

(Market Value Trend of U.S. Gold Reserves)

Different from most countries that store gold reserves in their central banks, the United States holds its gold directly through the Treasury. The Federal Reserve holds gold certificates corresponding in value to the Treasury’s gold reserves and provides dollar credit to the government based on these certificates.

This means that if the Treasury updates the value of its gold reserves according to current market prices, it could inject approximately $990 billion into its coffers, thereby greatly reducing the need to issue new government bonds this year.

Market participants believe that although there are legal questions and the move may be regarded as unconventional, given the aggressive style of the Trump administration, the probability of gold revaluation is rising.

"Unconventional" Operations Similar to QE

Revaluing gold reserves would directly impact the balance sheets of both the U.S. Treasury and the Federal Reserve. Specifically, the assets of the Treasury would increase due to gold revaluation, and its liabilities would also rise as it issues an equivalent amount of gold certificates to the Fed.

At the same time, the Fed’s balance sheet would also expand accordingly. On the asset side, gold certificates of equivalent value would be added, while on the liability side, deposits in the Treasury General Account (TGA) would increase to balance it out.

The ultimate effect is that the size of the Fed’s balance sheet would expand, making it appear as though a round of quantitative easing had taken place, but the entire process would not require any open market purchases.

In short, so long as the Treasury agrees to recognize the value of gold at fair value, it could create about $990 billion out of thin air, to be used for paying down debt, filling deficits, or setting up a sovereign wealth fund and other priorities.

In the market, a revaluation of gold reserves would be seen as an unconventional policy tool.

The United States has not revalued its gold reserves for decades, mainly to avoid huge fluctuations in the balance sheets of the Treasury and Federal Reserve, and to maintain the independence of fiscal and monetary authorities.

Reportedly, there are precedents for such moves. In recent decades, Germany, Italy, South Africa and other countries have revalued their gold reserves.

Market Concerns and Potential Risks

For this kind of unconventional operation, market analysts have pointed out some potential risks.

Bank of America strategist and former New York Fed official Mark Cabana believes that boosting cash accounts through gold reserve revaluation could stimulate macroeconomic activity, trigger inflation risks, and inject excessive liquidity into the banking system.

He emphasizes that this move would simultaneously loosen fiscal and monetary policy, which the market may not view positively, as it essentially amounts to disguised quantitative easing and could erode the independence of fiscal and monetary authorities.

In addition, the official revaluation of U.S. gold itself may further push up the prices of gold, Bitcoin, and other assets that could be “remonetized” in the future.

Unless Treasury Secretary Bessent provides more credible details on how to “monetize the asset side of America’s balance sheet,” the probability of implementation remains low and faces legal obstacles.

However, considering the Trump administration's "quick-acting, unconventional" style, some analysts believe the likelihood of a gold revaluation is rising sharply. They believe that this anticipation is one of the major drivers behind gold prices approaching $4,000 recently.

Risk Disclosure and DisclaimerThe market carries risk and investment should be made prudently. This article does not constitute individual investment advice and has not considered individual users' specific investment objectives, financial circumstances or needs. Users should consider whether any opinions, views or conclusions in this article are appropriate for their circumstances. Investments made accordingly are at your own risk. ```