In today’s Finshots we look at what’s brewing at Fort Knox, the US’ largest gold vault.

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The Story

Gold’s been a special metal for centuries. A symbol of wealth, power and trust. Kings hoarded it. Empires waged wars over it. Your ancestors probably stashed some too, passing it down through generations. And central banks today are scrambling to get as much of it as they can.

For context, of the 2 lakh tonnes of gold mined on Earth, a large chunk of it or 17% is with central banks.

And no one hoards more gold than the US central bank. It has about 8,100 tonnes of it.

But here’s the thing. A significant portion of the US gold reserves is stored at Fort Knox, a highly secure depository, and the theme of today’s story.

Fort Knox currently holds over 147 million ounces of US gold or about half of the US Treasury's total gold reserves. That sounds like a fortress of wealth but here’s exactly where the cracks start to appear.

Because the last full audit of Fort Knox happened in 1953. Since then, except brief reviews in 1974 and 2017, no one has been allowed to verify if the gold is really there. And that’s why Elon Musk and Donald Trump are now pushing for its full-fledged audit.

So, what happens if the audit goes through?

Well, one possibility is that everything checks out. The gold is there, neatly stacked and accounted for. And that would actually be a good thing. Because you see, the gold inside Fort Knox is still valued at an outdated price of $42 an ounce, far from the nearly $3,000 per ounce at which gold trades today. That’s an enormous gap in valuation, and if the US were to revalue its gold holdings, it could reshape its balance sheet overnight.

For context, at the valuation of $42, the US’s total gold holdings at Fort Knox comes to a total value of around $11 billion. But if it were to be valued at today’s gold price of around $2,900, that same figure would jump to a staggering $760 billion.

So a revaluation could restore faith in the US financial system and strengthen the dollar.

But  what happens if the vault isn’t as full as claimed?

Well, that could set off a financial earthquake. Just think about it. Those gold bars at Fort Knox represent security. They may not back the US dollar any more but they’re a safety net for the US Fed and other central banks worldwide since gold is the ultimate safe haven asset. It doesn’t lose value like paper currency. That’s why central banks stockpile it, balancing their reserves between foreign currencies and gold to manage risk.

But if the gold isn’t really there, that balance disappears. Panic sets in. People lose trust in the government, feeling like they’ve been lied to all along. Besides, countries that hold massive foreign exchange reserves in US dollars might start selling them. That can weaken the dollar and before you know it, inflation could spiral out of control. Investors would also start looking elsewhere, possibly to gold itself as an alternative store of value.

And that makes us ask ― Why would the US want to open this Pandora’s box in the first place? If there’s a shortfall in gold reserves, wouldn’t an audit be self-destructive?

The answer is actually pretty interesting.

For starters, you have to accept that the US dollar is overvalued and it’s creating problems for the US as well as other trading partners. And it’s not us saying it. Even Fed Chairman Jerome Powell admitted just months ago that “the US federal budget is on an unsustainable path. … The debt is not at an unsustainable level, but the path is unsustainable, and we know that we have to change that.”

What this essentially means is that when debt grows unsustainably, interest payments rise, leading to more government spending and in turn more inflation. And one way to keep inflation in check is by maintaining higher interest rates, which discourages borrowing and spending. But there’s a flip side. Higher rates attract investors looking for better returns, strengthening the dollar. And since this vicious cycle has played out for decades, the dollar has remained overvalued.

That’s exactly why the US is looking for a new financial approach. In fact, it has floated one called the ‘Mar-a-Lago Accord’. It’s kind of a new economic system that includes the US tariffs, reducing debt, as well as monetising assets. And our focus here is on the asset monetisation bit. Could monetising assets mean revaluing gold?

We think so. And as we’ve told you earlier, gold revaluation could play a crucial role in this shift.

It could inject a massive asset base on the US Fed’s balance sheet. And that’s what the US needs right now, given that it has $36 trillion in debt today.

On the other hand, even if the audit exposes a shortfall, gold prices might soar (as panic drives more people to buy it). And that, paradoxically, could still benefit the US. Because while the government would face scrutiny, it would also profit from rising gold valuations. After all, any missing gold would be insured, ensuring that even a discrepancy could be spun into financial advantage.

Then there’s also the possibility that the entire Fort Knox episode is a political manoeuvre.

You see, the US abandoned the gold standard in 1971, meaning its economy isn’t technically dependent on Fort Knox’s gold reserves. So why bother for an audit now? Well, one theory that experts suggest is that it’s part of a broader transition towards alternative assets, specifically Bitcoin and other blockchain-based digital assets. Lack of trust in the government can push people to turn to decentralised alternatives like Bitcoin as a hedge. And Trump seems to want that. He’s been hinting at building a strategic Bitcoin reserve, stockpiling Bitcoin to serve as a financial cushion during crises or even to chip away at the $36 trillion debt we mentioned earlier.

The logic is simple. Bitcoin has a limited supply, and the more the US buys, the scarcer it becomes. That scarcity could drive up Bitcoin’s value, allowing the government to use it as collateral, whether in emergencies or even to repay debt.

The US already holds nearly 2 lakh Bitcoins, worth around $19 billion, mostly seized through law enforcement actions. But instead of just holding onto these, there’s a chance that the government could actively buy more, potentially owning 5% of all Bitcoin in circulation.

So, if you look at it this way, the government might not even mind if gold-backed reserves lose credibility and people start moving towards Bitcoin. The shift aligns with Trump and Musk’s growing interest in digital assets, making the Fort Knox audit seem like more than just a push for financial transparency.

It might look like self-sabotage, but maybe, just maybe, it’s part of a bigger monetary reset strategy.

Sheepishly smart, eh?

Until next time…

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