A Problem So Big Not Even 8,000 Tons of Gold Can Fix It
Your News to Know rounds up the most important stories about precious metals and the overall economy. This week, we’ll cover:
- U.S. could gain $750 billion by revaluing its gold reserves...
- ...but what’s the point, unless they plan to sell it?
- What the flight of London gold to New York tells us about the financial system
- Your savings are the finance industry’s “dead capital”
Not even 8,100 tons of gold can fix our fiscal problems
Before anything else is said, let's remember that every U.S. government fiscal problem is fundamentally a dollar problem.
When you read, hear or see something weird or unbelievable about U.S. monetary policy, that translates directly to the dollar.
The U.S. dollar is the American economy. The economy’s status depends on the dollar – on the “dollar vibes,” as the kids say.
And what has the dollar vibe been lately? One story that has been making the rounds recently is the notion of revaluing our nation’s gold reserves.
For the purposes of this analysis, we will accept the claim that there really are 8,100 tons of gold bullion fully unencumbered, owned outright by the nation, tucked away in secure vaults. Even that’s not a majority opinion at the moment…
Regardless! The whole gold revaluation concept is not new, nor something we haven't discussed previously.
Here it is in a nutshell:
- The nation’s gold bullion reserve is a national asset
- However, all 8,100 tons of gold are still on the books at the gold standard-era price of $42.22 per ounce
- If the pencil-pushers at the Treasury Department or the Federal Reserve mark the gold reserve to current market prices, the federal government suddenly has more money
Updating the value of the gold reserve to the current price of gold would result in an addition of $750 billion to the nation’s balance sheet1.
Sounds like a lot, right? It’s four times more than the government collected in tariffs and excise taxes in 2024. For me and you, $750 billion is an unimaginable amount of wealth.
On the other hand, $750 billion isn’t enough to cover even half of a single year’s budget deficit.
That’s how bad our nation’s financial situation has become.
The annual budget deficit is over $2 trillion2. A new spending bill being proposed would amount to $6.5 trillion, doubling said deficit. Consider that we’re already $36 trillion in the hole, and a one-time airdrop of $750 billion just doesn’t help that much.
Furthermore, consider this fact for just a moment: The total above-ground gold supply (that’s all gold ever mined throughout human history!) is about 216,265 metric tons (7 million troy oz). At today’s prices, that’s worth a little over $20 trillion.
Our nation’s created a pit of debt so deep that not even all the gold in the world can solve it! Against figures like these, what is $750 billion as a one-time payment, especially given how it's to come from? Pretty much nothing. The Treasury has been borrowing about $6 billion per day – about $2.6 billion of that is debt service payments!
Now that we've covered the bad, we have to get to the worse…
To actually make any use of this “new” $750 billion asset, the U.S. would have to sell some (or all) of its gold.
This is a terrible idea!
The whole reason nations have gold reserves is to provide a stable store of value to their currencies. (Theoretically, if a nation did default on its borrowing, creditors could lay claim to its gold reserve in compensation.)
In other words, even though we’re no longer on the gold standard, our national gold reserve provides collateral that underpins the value of the dollar itself.
But even if we, again, imagine our national vault does indeed have 8,100 tons of dusty gold bullion bars sitting securely, we are as ill-positioned as ever to part with it.
That gold is what's giving the U.S. its clout, or the claim of the gold anyways. Emptying our vaults and officially stating "Hey, we've parted with our gold" would leave us exceptionally vulnerable to any international attempt to return to a gold standard. You don't want to be a global superpower with no gold when another country (or, ahem, BRICS) launches a currency backed by gold!
That's a quick path to loss of global reserve currency status.
What this discussion has highlighted, more than anything, is just how badly positioned the government’s money management really is.
Think about it – an extra $750 billion still leaves us heavily in the red. And that’s it. We burned through the nation’s emergency fund, so what’s next? Without a balanced budget and a plan to pay down the national debt, the annual deficit and rapidly-compounding debt are still growing.
One more interesting bit from the article above was that instead of a currency devaluation race, there could be a global monetary system reset where currencies are deliberately devalued against gold. It would be a second, better Bretton-Woods, and end most currency problems.
It's a very interesting idea. But it won't happen. Why?
Because countries prefer currency devaluation! In a global race to the bottom, every nation that finances its spending with debt and currency devaluation has a chance to “win” the game. They can destroy their own external debt – at the cost of impoverishing their citizens, sure, but no real patriot is going to fuss too much when it’s an existential crisis. Right?
Meanwhile, their central banks can hoard real money -- gold bullion -- in the background.
As I said before, what does Russia care about a weak ruble so long as their gold vaults are getting filled up?
Eventually, the world will return to sound money. History shows us that the world always returns to gold.
But not voluntarily! The way the return-to-gold happens involves economic collapse, social mayhem and (quite often) international conflict.
That's how the Bretton-Woods agreement started in the first place, after all. It wasn't a bunch of central bankers deciding after a few calm years that it's enough money nonsense. No, it took a global world war and entire nations reduced to rubble to get there.
Let’s hope war isn’t necessary this time. The good news? No American citizen needs to wait for an official return to a gold standard, to sound money. Here in the U.S. we’re free to put ourselves on our own personal gold standard whenever we choose.
Who’s emptying the London bullion vaults, and why?
My colleague Phillip Patrick recently appeared on War Room to discuss this story – here’s the interview with Steven Bannon:
BGG - Transcript
Phillip Patrick of Birch Gold. So a couple of things over the last 72 hours that I think have a lot of interest in our audience and a lot of interest online. Number one, there’s a situation where the Bank of England, and people think, hey, the Bank of England’s like the Fed, right? Maybe even more responsible.
The Bank of England has been late or failed to deliver on some clearing of gold. And there’s questions of, do they actually have the gold they think they have? Is there anything to this? Is this, is this, is this commitment they’ve had to clear this within the bounds of the timeframe or does something happen here with the Bank of England, Philip Patrick? Yeah, we’re, we’re, we’re working through it. It’s certainly big news in the industry, but the Bank of England right now is under siege.
The vaults are being emptied at a rapid pace, about 8,000 bars now have been shipped. And these are the big commercial gold bullion bars. We’re talking 3.2 million ounces.
That’s the equivalent of South Korea’s national gold reserves have now found a new home. The media latched onto this because Deputy Governor of the Bank of England, Sir Dave Ramsden, admitted that they wouldn’t be able to meet the 14-day delivery requirement, which technically could be considered now a default. The lawyers I think will work through and, and settle that question.
At the moment, London’s saying they need six to eight weeks to make a two week delivery. So currently this is being described as a liquidity crisis rather than a solvency crisis. But on the other hand, the Bank of England has been begging nations whose gold reserve that they custody to loan their gold to the Bank of England.
And that’s obviously concerning in, in the current climate. It seems like when a liquidity crisis becomes a solvency crisis, we only discover the truth too late. So right now it is a technical default, not, not a solvency issue, but we’re going to have to watch and see how this thing unfolds.
Well, hang on for a second. Hang on a second. Liquidity crisis is a pretty bad when it comes.
What is actually delivery? What is this transaction about? And when’s the last time bro, you’re a professional. This was the last time the Bank of England couldn’t deliver and had, Oh, well, we’ll get to you in six, six to eight weeks. That’s a lot longer, 14 days, brother.
What was actually this a delivery on? And when, when Philip Patrick starts off, yeah, the vaults, the Bank of England are emptying, even as we’re speaking, probably got the audience more worked up now than when we started. So, so walk me back through that one more time. I take it.
This interview is going to take longer start at the beginning, take your time and walk through this. So, so look, when we talk about physical delivery, we’re talking about physical delivery of a commodities contract, one to 2% of contracts usually request physical delivery. But what we’re seeing at the moment generally is gold is flooding out of London.
And this was the center of the world’s gold market. There’s a number of reasons why, right? First of all, and sort of the overarching theme is just massively increasing demand. And you and I have discussed this, it’s being driven by central banks and investors alike.
Secondly, there’s an arbitrage play here. And this is ultimately how markets respond to price dislocations. Right now, the gold futures price in New York is high enough over the London cash price that it’s possible to rent a cargo plane, fill it with gold and ship it to the U.S. commodities exchange.
This difference has always existed, but it’s almost never profitable enough to warrant shipping. Today, it is because U.S. demand is higher for precious metals, for gold specifically, than anywhere else, right? A bar of gold is worth more here in the U.S. today than a bar of gold everywhere, anywhere else, making the trade profitable. On top of that, of course, we’ve got the potential of tariffs driving up commodity prices on all imports.
So there’s massive pressure right now to onshore product in anticipation of further demand surges. Look at J.P. Morgan. They just shipped three million ounces of gold bullion from the London bullion market to the U.S. That’s the second largest gold bullion delivery in history.
What this tells me, though, I think it’s a reminder that gold is almost uniquely a physical asset, first and foremost, not just a financial asset. We have to remember a lot of the trading we see in the gold markets is imaginary, right? It’s simply made up for some numbers. In London, there’s 20 million ounces of gold that are traded every day.
That’s roughly an entire year’s of production traded every week. We see another 27 million ounces trading every day on the comics. That’s the entire world’s production of newly mined gold traded every two and a half days.
Spoiler alert, there isn’t that much gold out there. So as a result, 96 percent of the gold traded daily in London and New York markets has no physical reality. You could think of it as as Schrodinger’s cat.
Right. But the problem is once the 4 percent of real gold has been delivered, what’s going to happen then? Right. At that point, it’s a logistical nightmare.
First of all, I think investors who think they own gold are going to discover that what they really own is an IOU. Secondly, I think we see a wave of defaults on physical gold deliveries. Remember, 96 percent of them are by definition impossible.
And thirdly, I think those dynamics will amplify demand for physical gold because investors will realize and be reminded that only physical, tangible gold matters. It almost reminds me of the bank failures back in in 2023. Right.
If I have a dollar in my pocket, it’s really a dollar. If it’s in the bank, is it really a dollar? Right. We already know that if everyone tries to get their money out of the bank tomorrow, the banking system will collapse.
Right. Because banks don’t have it. They lent it to commercial real estate developers.
And that’s what the gold market is feeling like right now. Gold as a financial asset only really works as long as everyone agrees they don’t really want gold. Right.
They want to speculate on its price moves. The moment people start demanding physical gold deliveries on their commodity contracts, the market falls apart. And I think we’re starting to see the beginnings of that right now.
So in summary, if you can’t hold it in your hand, it isn’t real. And we’re starting to feel the effects of that. The bank, the phrase Bank of England should never be.
The sentence should never end with liquidity crisis. I’ve got a minute. I want to hold you over.
How did that happen? It shouldn’t happen. And it’s a reflection of volatility around the globe. It’s a reflection of leverage going out of control.
And we’re starting to feel the effects of it. And we have problems here in the U.S. as well. You sent me an article about Elon pushing for an audit of Fort Knox.
We’ve got questions on U.S. gold reserves as well. So there’s a lot at play in the current climate. There’s no question about it.
But it’s an interesting time to be alive. I know. I know you’re busy, but I do want to hold you just through this short break, because I want to talk about this audit and how people can kind.
I think, Phillip, I think a couple of three people might want to talk to the Birch Gold guys. I’m just guessing. The Bank of England can’t make good on their deliveries.
I don’t know. Get Phillip Patrick on the phone. Let’s talk to the guys at Birch Gold.
Short commercial. Phillip, you guys at Birch, one of the reasons I like you, you guys just deal in physical delivery, right? You deal in people owning the gold itself. That’s all we deal with.
Physical precious metals. They don’t sit on balance sheet, no counterparty risk. The individual owns them.
It’s important for us. Absolutely. Do the audit.
Give me a minute on the audit on Fort Knox. Ron Paul and Rand Paul have been bugging on this forever. Why do you want to see it? And what do you hope is the outcome? For a long time.
I mean, we need some transparency. Fort Knox hasn’t been audited for 50 years. Basically, the last audit was in 1974, primarily because the U.S. government is refusing external audits on the grounds of national security.
And this is the part that concerns me, right? They say that, you know, gold reserves are seen as a symbol of national credit and a public order they fear could trigger a crisis of trust. So here’s the strange thing in my mind, right? How can an audit create uncertainty unless it discovers discrepancies? Right. The whole point of an audit is simply to examine financial records and to create certainty.
Right. So this is reminding me of the situation with the Bank of England. If the gold’s really there, why can’t you ship it? Why can’t we see it? Right.
Why does anyone resist an audit if there’s nothing to hide? That for me, conceptually, is just difficult to get my head around. But I want to see it. Right.
I want to confirm that the U.S. gold reserves are unencumbered, that they haven’t been leased or sold to foreign nations or stored on their behalf. But like I say, the fact that they’ve been resisting an audit for decades here in the United States is in on itself very concerning, despite public calls for one. So, you know, this is just another move for transparency.
And if Musk can pull it off, like I said, I’d be very interested to see the results. Help me out here. Isn’t there supposed to be $750 billion, almost a trillion dollars of implied value that it’s on the books at $42 an ounce? And actually today, mark to market is $29 over $2,900.
Is that not an issue of the audit? But that’s reality, right? It’s on the books at $42, $49. And it’s actually, the mark to market’s $29, so we have almost a trillion dollars of intrinsic value in there, sir. Yeah, it’s exactly correct.
$42.22 an ounce is the book price, which gives about $800 billion, but at current prices, over a trillion dollars. So that is based on published gold reserves. We’ll have to see the reality if Elon can get an audit.
But yeah, that’s absolutely correct. Yes. Last thing, the gold ship to, real quickly, I know you’re going to bounce.
The gold, there was a huge shipment from New York, from London to New York. Was that the arbitrage you’re talking about? Is that normal course of business that people are just sensitive to it now? What happened there? It’s a combination. So it’s partly arbitrage.
They see a profitable arbitrage in there and it’s partly demand as well, right? Like I said, they need to get gold to meet domestic demand in the United States and they need to do it before tariffs kick in. So I think they’re expecting a spike in demand and we’re fulfilling. So right now, like I said, it looks like a logistics issue for the Bank of England, but reaching out to foreign nations, asking to lend gold reserves, that’s a little bit concerning.
So I think we’ll have more clarity as we head through. Never good. But we’ll see how it shakes out.
I want people to come and talk to the experts. I want people to talk to you and your team where they go. Very simple.
Berksgold.com forward slash Bannon. That’ll get them access to free information. If there was ever a time to immerse yourself, not to steal your words, Steve, in information, now’s the time from an economic standpoint.
So Berksgold.com forward slash Bannon or Bannon, text Bannon to 989898. That’ll get them access to free information and they can reach me at Philip Patrick on Getter. I’m putting this stuff out all the time, all the articles.
So it’s there for people to read. And this is why tremendous amount of information with the Berksgold guys. Get smart and get smart today.
Philip, thank you for taking time. I know it’s a crazy day there. Thanks for having me, Steve.
It's really worth watching! Please check it out.
For another take on the same story, Katie Martin and Robert Armstrong dove deep on the latest episode of the Unhinged podcast, mostly relating to gold.
But there was one part that really stood out to me, and that should stand out to everyone interested in what money actually means.
The pair spoke about the recent shipments of gold to New York and London and the havoc it caused.
They correctly note that it costs a fortune to deliver large quantities of gold bullion, and that effort is disrupting the financial system.
In Armstrong’s words:
"To me, this is just astonishing that in our modern day and age we are closing what are essentially financial transactions by putting heavy metals on to planes and flying them across the ocean.
…It just shows you this asset is not like the others. The other ones you're just like, make a phone call. I'll trade you this for that. Yes. OK. Hang up phone. Whole thing is over. The only thing that has moved is electrons."
He also went over as to why the process is even more difficult than it looks on the outside, because New York wants gold bars in different shapes and sizes than London. (Yes, really!) Loco London gold bars are 400 oz. monsters costing about $1.16 million each today – while COMEX gold bullion bars are most commonly a slightly more modest 100 oz. priced at approximately $290,000 today.
So for London gold to enter the American commodities market, every London gold bar first goes to Switzerland to be melted down and repoured to meet COMEX standards before making the final leg of its trip to New York.
Why is this asset not like others? Why such a prolonged and bothersome process? We've replaced pretty much everything else with digital certificates that can be bought and sold internationally at the click of a button on your iPhone, right?
Couldn’t the geniuses of financial engineering do away with clunky old analog gold bullion, given how cumbersome and inconvenient it is?
No.
No we cannot. Long before the invention of the iPhone, or even the spreadsheet, gold was money – in exactly the same form. In fact, the digitalization of the entire world has made physical gold even more important as an asset than it was, say, 500 years ago.
It’s details like these that I want you to pay special attention to – we cannot simply assume that the gold and silver we want will be available when we want it. These precious metals are physical assets that can’t be summoned into existence even by the sharpest spreadsheet wizard.
This is also why Birch Gold Group doesn’t offer customers any form of financial asset other than physical precious metals. There’s a reason that global central banks demand physical gold – and you should, too.
Here’s what happens when the banking sector wants what you have
“Dead gold.”
That is the term Alexander George Muthoot, Joint Managing Director of Muthoot Finance, used in reference to India's household gold savings.
No, he doesn't mean gold is going out of style. (That would be silly – especially in India.) But there’s no lack of silliness here…
Muthoot is suggesting that India's 25,000 tons of gold held in households, often in the form of jewelry, is wasted capital. By the way, “wasted capital” is what financial engineering types call your savings when they can’t convince you to buy what they’re selling.
What they really mean is that your savings would be better off if you gave it to them – and paid them to invest it for you. Of course, what could also happen is that they lose your money. Never forget, in William Bernstein’s words, “In investing, risk and reward are joined at the hip.”
Muthoot wants his fellow citizens to monetize their “dead gold” by borrowing cash against it.
So they can open a business, go on a trip, speculate in markets or just buy a bigger TV.
Is it worth the risk?
Obviously not, otherwise there wouldn’t be so much pressure from the banking sector promoting the national gold loan scheme!
Despite my misgivings, this effort has been going well so far, if for no other reason than the destruction of the rupee and the lowering of life standard for many Indians. The gold loans business is booming, and Muthoot's company is seeing massive year-on-year gains. However, one gets the sense that a lot of the gold loan business is growing due to need, not want. In other words, it's cash-strapped Indian households needing some capital, more likely than not.
Again, Indians are among the world's biggest gold hoarders, and getting them to part with their gold is no easy task.
So no, we're going to have to disagree. None of the 25,000 tons of gold in Indian households is dead capital.
It's sitting there, appreciating in value, providing security both mentally and financially, on top of securing future generations. That sounds lively to us.
Unfortunately, given the overall economic situation in India, it is anyone's guess as to how much household gold will be left by the time India's money managers are done with the populace.
BGG - About the Author
BGG - About the Reviewer
Sources
- “How Much Gold Does the US Government Own and Where Is It?” https://mises.org/power-market/how-much-gold-does-us-government-own-and-where-it
- “12-Month Rolling Deficit at $2.0 Trillion in April 2025.” https://www.crfb.org/blogs/12-month-rolling-deficit-20-trillion-april-2025
BGG - CTA Option 2
