A growing stockpile of physical gold and silver in the United States, coupled with renewed focus on its own reserves, could have far-reaching implications for consumers and the global economy. According to Thorsten Polleit, Honorary Professor of Economics at the University of Bayreuth, a “free market in money” could be the solution to fixing inflation, which has become a major threat to the US economy.
Polleit notes that banks are building up their gold and silver reserves as a hedge against tariffs and low yields on higher-risk corporate bonds. This trend has led to a surge in demand for gold and silver, with prices hitting new record highs against all major currencies. However, Polleit argues that the unsustainable rise in US debt has pushed the Federal Reserve and fiat money as far as they can go.
In his view, using gold and silver as hard currency alongside the dollar could stabilize inflation, but this would require significantly higher prices for precious metals to accommodate the size of the US economy. Polleit also points out that the Federal Reserve’s measures to rescue the US economy have mispriced risk in the marketplace, making gold a safe-haven asset.
Polleit suggests that a new type of gold standard could be introduced, which would allow the government to support its domestic economy and protect consumers from rising inflation. He believes this approach has been proven effective over thousands of years, with gold consistently demonstrating its value. However, Polleit warns that implementing such a system would require significant changes to the current monetary regime.
The US government is currently exploring ways to monetize its gold reserves, which have been valued at $42 an ounce since 1972. Some analysts speculate that this could lead to a revaluation of the Treasury’s gold hoard, increasing assets by nearly $800 billion. Meanwhile, officials have voiced support for an audit of both the Fed and Fort Knox to ensure all of the government’s gold is accounted for.
Polleit concludes that long-term gold prices will need to rise higher as the government considers monetizing its reserves. However, in the short term, prices could remain volatile, making it essential for investors to focus on the bigger picture rather than getting caught up in short-term fluctuations.
Source: https://www.kitco.com/news/article/2025-02-20/how-us-could-use-its-gold-reserves-reshape-economy-thorsten-polleit