Why Washington Wants Gold Higher

Gold is up about 135% since ChatGPT launched.

Now, that's a strange result for a technology that was supposed to make everything cheaper.

The pitch was simple enough. Smarter software means lower costs, and sooner or later, lower prices.

Instead, consumer prices rose 3.7% over the past year. Producer prices (what businesses pay before anything hits a store shelf) rose 6.3%, the fastest pace since 2022.

And gold, the thing people buy when they stop trusting paper money, has more than doubled.

Earlier this month, the director of the Congressional Budget Office (the government's own scorekeeper on spending) said out loud what a lot of people in Washington won't.

Growth will help, he said, "but it's probably not plausible that growth alone will stabilize our fiscal trajectory."

By his rough math, the economy would need to grow 5% to 6% a year after inflation just to keep the debt from outrunning it.

The latest quarter came in at 2.2%.

So if growth can't get us out of this, something else has to give.

I think part of the answer is sitting in a vault in Kentucky... and the government still has it on the books at $42.22 an ounce.

Fort Knox Is on the Books for $11 Billion

The U.S. Treasury owns about 261.5 million ounces of gold. That's roughly 8,133 metric tons, most of it at Fort Knox, West Point and Denver.

By law, it's carried on the government's books at $42.2222 an ounce, a price Congress set back in 1973. At that price, the whole pile is worth about $11 billion.

Gold trades around $4,130 as I write this.

At that price, the same metal is worth about $1.08 trillion.

The difference is about $1.1 trillion of value Washington has never booked. That's roughly a full year of interest on the federal debt.

I run a few businesses. If one of them carried an asset at about 1% of what it's actually worth, my CPA would be on the phone with me the same day.

In Washington, that phone hasn't rung, at least not publicly.

FDR Marked Gold Up 69% Overnight

Now, this has happened before. And the last time it did, the government kept the whole gain.

In April 1933, Franklin Roosevelt ordered Americans to turn in their gold. The Treasury paid them $20.67 an ounce.

Then in January 1934, Congress passed the Gold Reserve Act, and the very next day the official price went to $35. That's about 69% higher.

The Treasury made a profit of roughly $2.8 billion. That was about 4% of the entire U.S. economy that year. The same share of today's economy would be more than $1.2 trillion.

About $2 billion of that 1934 profit went to set up a fund the Treasury uses to step into currency markets, and believe it or not, that fund is still running today.

The people who turned in their gold at $20.67 got none of it.

Owning gold has been legal again since the end of 1974, and I don't lose sleep over a 2026 gold confiscation, but the odds aren’t zero.

To me, that's the real lesson of 1934. A revaluation pays the government.

And a government that gets paid when gold goes up has every reason to want gold higher.

Other Governments Have Used Gold to Pay Debt

In August 2025, the Federal Reserve published a research note called "Official Reserve Revaluations: The International Experience."

Not exactly a page-turner, I know. But it looked at countries that have used paper gains on their gold and currency reserves over the past 30 years, and one line jumped out at me:

"Central governments have drawn on revaluation proceeds to retire existing debts, often in exceptional fiscal circumstances."

South Africa is the best recent example. In 2024 it agreed to move R150 billion of those gains (roughly $8 billion) from its central bank to its Treasury through 2027, specifically so the government could borrow less.

Lebanon did it back in 2002 and used the money to retire $1.8 billion of short-term debt.

Its debt kept climbing anyway, and the Fed's own note points that out. So marking gold to market buys a government time, but that's about all it buys if the spending doesn't change.

Early last year, Treasury Secretary Scott Bessent said the administration wanted to "monetize the asset side of the U.S. balance sheet for the American people."

A lot of gold bugs took that as a hint. He later said he wasn't talking about repricing the gold.

I take him at his word. Proposals like this pop up every few years and go nowhere.

By the way, a bitcoin reserve bill introduced in Congress in May even lists revaluing the gold as one way to pay for it. That bill hasn't moved either.

But the question keeps coming back, and I don't think that's an accident.

Gold Now Covers Under 3% of the Debt

Now compare that $1.08 trillion to what Washington owes. The federal debt passed $40 trillion in August.

So the gold covers less than 3% of the debt.

In 1980, according to Incrementum (a longtime gold research firm), it covered about 20%. In 1940, it covered close to half.

The same firm ran another set of numbers I think about a lot.

For most of the last century, the dollar was legally tied to gold. Until 1945, the Fed had to hold gold worth at least 40% of the money it issued. After that the floor was 25%, until it was dropped altogether in the late 1960s.

Apply those old rules to today's money supply and America's gold, and you get implied gold prices of about $5,200 at 25% coverage, $8,400 at 40%, and $21,000 if every dollar of the monetary base were fully backed.

Now, I'm not forecasting $21,000 gold.

I use those numbers as a measuring stick for how much paper money has been printed against a pile of gold that's barely changed since the 1970s.

Gold Is 26% Below January's High

Of course, gold isn't trading like a metal that's about to get marked up by Washington.

It peaked near $5,600 in late January. It's about 26% lower now, and roughly flat from a year ago.

The Fed raised rates in September, the 10-year Treasury yields more than 5%, and the dollar's been strong. Gold pays no interest, so when bonds pay you 5% to wait, holding gold costs you something.

Even so, investors put a record $31 billion into gold funds in the third quarter, the same quarter the Fed raised rates.

China's central bank bought gold for the 23rd month in a row in September, its biggest monthly purchase in three years.

And remember, a revaluation is an accounting move. It changes the number on the government's books, but it doesn't force anyone to pay more for gold in the open market. If it ever happens, the first and biggest winner is the Treasury.

So if you're buying gold because you expect Washington to revalue Fort Knox, you're really betting on a press conference.

I own gold for a different reason, the math that makes a revaluation tempting in the first place.

Debt is growing faster than the economy, interest costs are over $1 trillion a year, inflation's running hot again, and the CBO's own director is saying growth can't fix it.

I'm a gold and hard-money bug, and always have been.

I honestly can't tell you exactly when I bought my first ounce. It was a long time ago, and I haven't sold one since. I grew up in an immigrant household where gold, real hard money, was always important. Which likely explains my obsession with Bitcoin as well.

Do You Own Enough Gold?

Private investors hold less than 3% of their money in gold today. In 1980, it was more than 8%.

So tonight, ask yourself what share of your investable money is in gold or gold miners.

Write the number down.

If it's zero, ask yourself what you know that the central banks buying every single month don't.

If it's a lot, make sure you can sit through a 25% drop, because gold just handed us one.

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