Some governments, facing high public debt, have looked for ways to fund spending without raising taxes or issuing more debt. One idea is to revalue their gold reserves—essentially updating the official value of their gold holdings to match current market prices—and then use the “paper gains” to generate real funds.
The United States, for example, officially prices its 261.5 million troy ounces of gold at $42.22 per ounce, even though the market price is around $3,300. Revaluing this gold could, on paper, create enormous gains. But history shows this strategy’s benefits are short-lived.
Over the past 30 years, only five countries—Germany, Italy, Lebanon, Curaçao and Saint Martin, and South Africa—have done this. The proceeds were used either by central banks or by governments. Central banks often used them to cover losses or boost profits. Italy, in 2002, used €13 billion from gold revaluation accounts to cover losses from a specific bond conversion, turning a potential net loss into a small profit that year. Curaçao and Saint Martin used them to offset falling income from low-yield investments, while also making other changes to improve income long-term.
Governments, on the other hand, used the funds to reduce debt. South Africa, starting in 2024, planned to use R150 billion of gold valuation gains over three years to cut borrowing costs. Lebanon, in 2002, used revaluation proceeds to retire $1.8 billion in treasury bills—11% of its GDP. Germany, in 1997, revalued gold and foreign exchange reserves before transferring part of them to the European Central Bank, freeing funds to help meet Maastricht budget rules.
But the impact was limited. Lebanon’s debt-to-GDP ratio kept rising even after using gold revaluation funds. Germany met its budget target without even needing the revaluation proceeds. South Africa’s program is too recent to judge, but it faces similar challenges.
The key issue is that revaluation only provides a one-off benefit. Even if the U.S. sold its entire gold stock at today’s record prices, it would only gain funds equal to about 3% of GDP—hardly enough to solve ongoing fiscal pressures. Moreover, it doesn’t address underlying structural problems such as spending imbalances, low growth, or high debt servicing costs.
In short, revaluing gold reserves can be a useful temporary tool for covering losses or reducing debt slightly, but it’s no magic solution. It’s like selling family heirlooms to pay a bill—helpful in the moment, but not a sustainable strategy for long-term financial health.
