Summary
- The gold market is rife with conspiracy theories, some of which may hold merit, particularly regarding the potential revaluation of U.S. gold reserves.
- Speculation has arisen that the U.S. government may revalue its gold reserves, currently priced at $42 per ounce, to the market price near $3,000 per ounce.
- If implemented, such a revaluation would drastically increase the value of U.S. gold reserves from $11 billion to over $750 billion, potentially providing capital for a sovereign wealth fund.
- A theory suggests the U.S. could accumulate gold through major bullion banks before announcing an official revaluation, while cash-settling COMEX gold futures contracts at lower prices.
- Historical precedent exists for U.S. government intervention in the gold market, such as gold confiscation in 1933 and a revaluation in 1973.
- Some analysts speculate a future "Mar-A-Lago Accord" could bring a coordinated gold revaluation among major global economies, including the U.S., China, and Russia.
- A higher gold price could help back long-term Treasury securities and restore confidence in the financial system amid economic uncertainty.
- Global gold supply shortages and increasing demand from central banks and investors are driving up prices, adding urgency to securing physical gold.
- Silver prices have also risen, with silver bulls expecting further gains, particularly as gold leads the way in a broader bullion market surge.
- Despite skepticism, historical market trends suggest that gold and silver could experience significant price increases, particularly in times of financial instability and geopolitical shifts.
You’re never far away from conspiracy in the gold market. But not all conspiracies are false, and in markets one needs to keep an open mind to stay solvent.
The recent influx of gold and silver into Comex warehouses in the US has led to speculation the US is on the verge of revaluing its reputed considerable stock of gold, valued at $42 an ounce, to the market price — currently approaching $3,000.
It’s a theory that can’t be completely discounted with disruptor-in-chief Donald Trump in charge.
But what if something bigger is afoot?
There is a long-held belief in the gold market that one day the US will revalue the more than 8,133 tons of gold it is reputed to have. (I say reputed, as another longstanding rumor is that the US does not in fact have all the gold as is stated, with the last audit having been in 1974.)
The gold in Fort Knox and the other US depositories is valued at $42.22 per ounce. At that price it’s worth only $11 billion. But revaluing it at today’s price of around $2,900 would make it worth over $750 billion. Handy if you’re wanting some starting capital for a sovereign wealth fund.
How a revaluation would work, the theory goes, is that the US would import and bid up gold ahead of the price change through the largest bullion banks. It would then announce it’s marking its gold at the new price.
At the same time or before, the government would announce by fiat that all COMEX gold futures contracts would be cash-settled at a lower price, as there wouldn’t be enough gold bullion to meet physical delivery to the long contracts outstanding. The US has formed here, confiscating gold from private ownership in 1933.
As paper gold holders would find out with merciless rapidity, right at the moment when you need your gold, you can’t get it.
As said at the top, the US going down this route is only a tail risk, but one that’s marginally more likely with Donald Trump at the White House. There are already several things he has done and said that were probably not on many people’s presidential bingo cards.
Regardless, changes in the gold market bear close scrutiny as they are reflective of the major and ongoing shifts seen in the geopolitical tectonic plates over the past few years.
These words were written yesterday Feb 13th, 2025 by Simon White, Bloomberg macro strategist.
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You may recall that during the first Trump Administration, the then US Treasury Secretary visited Fort Knox on August 21st 2017 the day a solar eclipse.
He even sent a tweet out, confirming his gold reserve visit that day. "Glad gold is safe."
Well, in only about two weeks into his new role as US Treasury Secretary head Scott Bessent has already made more noise in the global gold market than Mnuchin's fly by solar eclipse visit.
Let's break this gold revaluation on the books idea a bit further.
This US gold revaluation on the books accounting move has been done before. James Rickards points out that in 1973 it was done.
Let's hear from another important gold and macro commentator speaking yesterday. Luke Growman from the Forest for the Trees letter - https://fftt-llc.com
Luke Gromen on FACE Forex Analytix yesterday:
https://youtu.be/SnO_PMXyd2Y?si=BsPoHM8hd4SXRyLX
The gold revaluation hypothesis potentially comes in stages of eventual large nation restructuring agreements.
An idea that revolves around a potential future Mar-A-Lago Accord for a more dramatic revaluation of gold vs outstanding fiat currency supplies amongst the G8 Russia, and China, with the largest global leaders and heads of states at said accord.
An idea that could be necessary to back the new long-term Treasury securities the current administration is aiming for. This revaluation could see the price of gold skyrocket to well in five figures per troy ounce levels. The reattachment of gold to the dollar and other major currency units would provide a more stable foundation for the U.S. currency and could help restore confidence in the global financial system at large.
The current global gold bullion supply delivery rush delays, stock outs, or shortages. However you want to describe them, is a critical factor in this equation. With central banks and investors alike scrambling for physical gold, the demand far outstrips current supplies at the artificially suppressed for decades relative gold valuations.
This current shortage fiasco is driving up gold prices and investor interest globally, and creating a sense of urgency among nations to secure their gold reserves now, not later. A coming gold Mar-A-Lago Accord could be seen as a preemptive move to secure the U.S. position in a world where gold is once again a crucial asset while coming to terms with the largest economies in a new more multilateral economic order.
You might be hearing this and think it is all nonsense speculation gold pumper hopium.
But allow me to remind you, that the last time the London gold price rig was on the cusp of falling apart, a former Federal Reserve Governor drew this inverse pyramid illustrating that for the market to clear and come back into a sense of better balance. It would lead to a run to gold. Drawn in 1968 the same year London's price rigging gold pool fell apart in 1968. The spot gold price went on 24X in price in the following 12 years. Silver ran a 38X multiple by early 1980.
This time around it is not merely a Western world phenomenon as it was in the 1970s.
This time it is global, and I will show more examples of that this week on the other side of this break.
But the bottom line is the current system and geopolitical power dynamics are unstable. To bring economic tectonic plate stability back it will require a global consensus and large nation bloc agreements likely bringing gold bullion back up sharply higher in relative valuations versus all the myriad mushroom cloud of overvalued asset classes at the moment.
The other option is further instability, violence, and sheer collective global market forces bringing about gold's inevitable revaluation higher in likely more disorderly ways. We'll be right back.
The spot gold and silver markets in fiat US dollars popped into fresh higher ranges settling sideways for the week with selloffs to close today's trading. Keep an eye out on Monday's President's Day Holiday with US COMEX markets closed how gold and silver trade overnight in Asia Sunday and Monday evenings.
The spot silver market finished the week slightly up at a $32.13 oz bid. Yesterday overnight it seems levered silver longs on the SHFE moved silver upwards to 13 year nominal price high levels.
The spot gold price hit a new nominal price high spike earlier in the week, closing at $2,882 oz.
The spot gold silver ratio finally rolled over a bit piercing into 87 but closed the week at 89.
Silver bulls were of course disappointed by the selloff in silver today during COMEX hours. But the shorts days are numbered given all the fundamentals flying constantly in their faces now.
We're still perched high at a spot gold silver ratio higher than the highest high reached during the 2008 Global Financial Crisis. The coming room to cascade downward is still gigantic and long coming out of one of the highest spot GSRs ever reached on record during the Covid 2020 crash.
Typically when markets over shoot in one direction, they do so again to the opposite direction with enough time and patience. I'm silver bullion betting big time on that axiom.
As for the other side of the gold silver bullion buying world.
Given the massive high premium payoff sucking sound the last few months pulling available gold and silver bullion inventories onshore into the USA's COMEX warehouse, places like Korea are having bullion supply shortages.
You likely know that retail bullion demand in the USA is currently at multi-year low levels with premiums at razor thin levels across the vast array of bullion products offered.
In Korea the opposite is happening.
The largest retail bullion dealer in Korea has suspended both gold and silver bar offerings.
Quite understandable, their local spot gold price is climbing walls at the moment.
The lone buyable gold bullion products I found there are in the government bullion coin variety. Like these 1 oz Gold Maple Leaf coins currently priced at local spot + 10% import VAT + 14% premiums above spot.
Of course the spot price of gold leads, eventually silver follows.
Still having not yet hit its local nominal price high for silver in 2011. The lowest price government silver bullion coins I could find were Australian Kangaroos. They're priced in 25 coins per tube at local spot + 10% VAT + a 27% premium over their local silver spot price late this week.
Meanwhile here stateside, crickets judging by collapsing premiums on US 90% silver coinage inventories.
Shameless product plug moment. Visit SDBullion.com/deals for great low premium bullion product offerings this week while supplies last.
Quick gold and silver spot price check in Europe. In what is to me still the most remarkable underpriced silver story in the Western world on a local level.
Switzerland's local gold price is out the barn and off to the races.
Yet of course, slow mo silver has yet to get his track shoes on.
There the silver spot price still has to double and a half just to reach its ancient 1980 nominal price high.
Yea I know, I show it to you often. It's still crazy just how cheap silver still is in some places around the developed and wealthy per capita world.
Finally a reminder that what we have been seeing in gold and silver fiat US dollar spot prices to start this year is not normal. It's multiple standard deviations abnormal in fact.
This is gold's start to 2025 vs 5, 10, 20, and 50 year rolling averages of percentage gains.
Even crooked laggard silver is off to a killer start, being dragged by its leader gold, at least for now.
You might think, oh sure this won't last.
Well in a bullion bull market, the surprises are typically to the upside. And for those caught sleeping short, they can literally wipe you out insolvent and off the market in a flash.
That will be all for our weekly SD Bullion Market Update.
And, as always, to you out there.
Take great care of yourselves and those you love.
