The Federal Reserve is known to hold a significant amount of gold, valued at $11.037 billion at a rate of $35 per ounce. This may raise the question: why does the Fed value its gold at such a low rate? The answer lies in the Gold Reserve Act of 1934, signed by President Franklin D. Roosevelt.
The Gold Reserve Act was a part of Roosevelt’s gold program, aiming to stabilize the U.S. economy during the Great Depression. This act transferred ownership of all monetary gold in the United States to the U.S. Treasury and prohibited the redemption of dollars for gold.
Under the Act, individuals and institutions received currency at a rate of $35 per ounce of gold, reducing the gold value of the dollar to 59% of its previous value. This revaluation aimed to devalue the dollar as part of the administration’s larger strategy to boost the economy.
While the valuation of the Fed’s gold at $35 per ounce may seem outdated, it is essential to understand the historical context of the Gold Reserve Act. The Act was a measure taken during a time of economic crisis, and its effects are still felt today.
It’s important to note that the Fed’s gold valuation does not represent the current market price of gold, which is around $1984 per ounce. The Fed values its gold at such a low rate to prevent wild swings in its balance sheet’s value.
As for the question of whether the Fed will revalue its gold, it seems highly unlikely. The Federal Reserve has no apparent motive or authority to do so and does not have control over the market price of gold. Additionally, the revaluation would have little impact on the overall economy.
In conclusion, the low valuation of the Fed’s gold is a result of historical circumstances and economic strategies implemented during the Great Depression. While the market price of gold has significantly increased over time, the Fed continues to hold its gold at a much lower rate.
Q: Why does the Fed value its gold at $35 per ounce?
A: The valuation stems from the Gold Reserve Act of 1934, which aimed to devalue the dollar and stabilize the economy during the Great Depression.
Q: Will the Fed revalue its gold?
A: The likelihood of the Fed revaluing its gold is minimal. The Federal Reserve lacks the authority and control over the market price of gold.
Q: What is the current market price of gold?
A: The current market price of gold is approximately $1984 per ounce.