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During February-March of last year, there was talk of the US government revaluing the gold bullion that currently is an asset on the balance sheet of the Fed. The asset was being valued at $11B, or only US$42.22/ounce, whereas the market value of the asset at that time was around US$770B. The situation today is that the asset is still being valued at only US$11B, whereas its market value is now around US$1.2 trillion. This means that bringing the asset’s official valuation in line with its market value would now result in the addition of more than $1 trillion to the Treasury’s account at the Fed (the Treasury General Account, or TGA). Is this likely to happen anytime soon?

When we addressed this topic in February of last year, our answer to the above question was “no”. The reason, in a nutshell, was that while the monetary injection would give the economy a short-term boost, it would have longer-term negative effects, including higher price inflation. We concluded that, due to the short-term nature of any positive effect on the economy, from a purely political perspective, it would make more sense to implement the revaluation during the final year of the Presidential term than during the first year.

Due to the looming importance to Trump of the November 2026 mid-term elections, we now think that the revaluation could happen within the next few months.

If the mid-term elections result in the Democratic Party gaining control of the House, the path ahead for Trump would become far more difficult. Not only would it be harder for him to pursue his policy agenda, but also he probably would be impeached for a third time. Creating the impression that the economy was strong or at least improving during the months leading up to the election would reduce the risk of this happening. In this respect, we can’t think of anything realistic that would be as effective as a $1 trillion monetary injection that did not have to be financed via debt.

Adding a trillion new dollars to the TGA would be short-term bullish for almost everything except the US$. It would be bullish for the stock market, gold, commodities, bitcoin, and economic statistics such as GDP. It even would be bullish for the Treasury market, because it would enable the US government to spend a lot of money without issuing new debt. In fact, it’s possible that some of the money would be used to repurchase existing Treasury debt, thus lowering interest rates across the economy for a while.

Beyond the short-term, it would be bullish for gold and commodities, but very bearish for Treasury bonds and the economy. However, that would be a 2027 story.

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