President Donald Trump and Department of Governmental Efficiency (DOGE) Director Elon Musk have called for a full audit of the US gold reserves at Fort Knox, reigniting long-standing debates about the transparency and security of America’s bullion holdings. Framed as a move for government accountability, the proposal has found support from free-market skeptics concerned about the integrity of federal institutions and conspiracy theorists who believe the vaults contain little to no gold, or even counterfeit bullion. However, the timing of this initiative has raised broader questions about the role of gold in US financial strategy.
Speculation is growing that an official audit could be the first step toward a formal revaluation of America’s gold reserves, which are still recorded at an outdated $42.22 per ounce despite the market price approaching $3,000 per ounce. The potential implications of such a move are far-reaching — not only for the Federal Reserve’s independence and monetary policy, but also for inflation expectations, global gold markets, and the reserve status of the US dollar. Additionally, Treasury Secretary Scott Bessent has hinted at the possibility of monetizing the asset side of the balance sheet, a move that some analysts suggest could pave the way for financing the newly announced US Strategic Crypto Reserve Fund, which includes Bitcoin, Ethereum, and three other tokens.
In recent weeks, physical gold and silver inflows into COMEX warehouses have surged to levels not seen since the early days of the COVID-19 pandemic, reflecting what appears to be an escalating supply squeeze in global bullion markets. The London Bullion Market Association (LBMA), the world’s largest hub for physical gold trading, has seen its inventories plummet, while gold lease rates — analogous to repo rates in bond markets — have soared, indicating a scarcity of deliverable metal.
A growing number of traders holding long gold futures contracts are now demanding physical delivery instead of rolling over their positions, exacerbating the strain on already tight supplies. This shift has contributed to a self-reinforcing price rally, as rising futures prices encourage more long positioning, widening the spread between futures and spot prices, and further pressuring bullion banks to meet delivery obligations. Traditionally, these banks offset their exposure through leasing arrangements, but with gold reserves flowing eastward to emerging markets, the available supply has dwindled significantly.
Emerging market central banks have been a major force behind this tightening supply. Nations such as India, Poland, Turkey, and Hungary have not only expanded their gold reserves but have also begun repatriating their holdings from Western vaults. Historically, central banks stored gold in London and New York, where it could be leased into the market, adding liquidity and generating income. However, in recent years, a growing number of these nations have opted to store their reserves domestically, removing them from the lendable supply and deepening the disconnect between physical and paper gold markets.
At the same time, gold has been flowing into COMEX warehouses in the US, likely to compensate for the shortfall in London. This has coincided with an uptick in speculative activity, particularly from hedge funds and momentum traders, further fueling price momentum and intensifying pressure on bullion banks. Meanwhile, China’s Shanghai Futures Exchange, which provides limited transparency on inventory levels, appears to be absorbing additional supply, further constraining availability in Western markets.
Against this backdrop, speculation over a potential US gold revaluation has intensified. The US Treasury currently values its official gold holdings at just over $11 billion, based on the outdated $42 per ounce benchmark. However, at current market prices exceeding $2,900 per ounce, those reserves would be worth over $750 billion. Given the clearly demonstrated potential for unpredictable policy shifts under Trump and Musk’s leadership, a gold revaluation scenario should not be dismissed.
One mechanism involves reissuing new gold certificates at a revised market price, which the Federal Reserve would be required to exchange for existing ones. This accounting maneuver would result in an immediate increase in the Fed’s balance sheet, creating the potential for the Treasury General Account (TGA) at the Fed to be expanded by hundreds of billions of dollars.
Such a move could serve multiple purposes, including:
Strengthening the Fed’s balance sheet by increasing the proportion of hard assets relative to riskier holdings.
Providing fiscal flexibility for the US government to finance new initiatives — potentially even the strategic crypto reserve fund.
Triggering a surge in physical gold demand, as market participants attempt to hedge against the implications of such a move.
The potential effects of a gold revaluation on the US dollar ultimately remain uncertain. It could, even if not economically justified, bolster confidence in the dollar, particularly as the purchasing power of the dollar has eroded over time. If revaluation increases the weight of gold relative to other holdings, it could support the dollar’s status as a global reserve currency after years of the Fed warehousing lower-quality assets on its balance sheet.
On the other hand, the move could be perceived as backdoor quantitative easing (QE), further undermining confidence in the dollar. If the market views this as a reckless monetary expansion, it could accelerate concerns that the US is deliberately allowing the dollar’s reserve status to decline, potentially in line with the “Mar-a-Lago Accord” scenario (in which a renegotiation of its debt obligations is accompanied by dollar devaluation).
A gold revaluation would also have major implications for the paper gold market. The last time the US government officially revalued gold, in 1933, no gold futures market existed. If the US were to suddenly revalue gold, it could create a physical metal squeeze, forcing those short the futures market to scramble to meet delivery obligations, pushing prices higher. Given that major bullion banks — such as JPMorgan — often take short positions in gold futures, the government would likely need to intervene to prevent a systemic crisis in such a scenario.
One potential response could involve forcing all long futures positions into cash settlement, preventing a market meltdown. But such an action could significantly erode trust in the paper gold market, leading to a massive shift in demand toward physical metal, further exacerbating supply constraints.
While a formal US gold revaluation remains speculative, its potential consequences are profound. The combination of physical gold shortages, rising lease rates, and aggressive accumulation by emerging market central banks suggests that gold’s role in global finance is already undergoing a major transformation. Whether this shift results in higher gold prices, greater fractures between physical and paper markets, or an eventual restructuring of the global monetary system, remains to be seen.
With the call for an audit of Fort Knox, though, speculation about the US gold reserves is no longer confined to theoretical debates or conspiracy circles. It is now a question with real-world policy implications, as gold again takes center stage in the evolving landscape of global finance, monetary policy, and geopolitical strategy.
Peter C. Earle
