“This Federal Reserve article examines the rare international cases where countries have used valuation gains from gold and foreign exchange reserves to generate funds. Over the past 30 years, only five countries have done this: Germany, Italy, Lebanon, Curacao and Saint Martin, and South Africa. The article reveals two main uses: central banks have used these proceeds to offset operating losses (Italy, Curacao and Saint Martin), while governments have used them to retire existing debt during fiscal challenges (South Africa, Lebanon, Germany).
The potential for the U.S. is significant – revaluing America’s 261.5 million troy ounces of gold from the statutory price of $42.22 to current market prices around $3,300 per ounce could generate proceeds equal to about 3% of GDP. However, the international experience shows mixed results. While revaluations can provide temporary relief, they often don’t address underlying structural fiscal problems. Lebanon’s debt-to-GDP ratio continued rising even after using revaluation proceeds, and Germany faced significant opposition from its central bank and public when attempting this approach.”