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US Gold Revaluation Could Erase 70% of Budget Deficit Amid War

A report by SBI Research suggests the US could eliminate nearly 70% of its budget deficit by revaluing its gold reserves from 1973 prices to current market rates. The ongoing conflict in West Asia threatens to trigger a new global inflation wave by disrupting supply chains and energy markets. However, the US stands to benefit financially through increased energy exports to Europe, potentially offsetting war costs. Simultaneously, central banks are shifting reserves from US treasuries to gold, a major strategic change not seen since 1996.

Key Points: US Gold Revaluation May Cut 70% of Budget Deficit

  • Gold revaluation cuts US deficit
  • Middle East war spurs inflation
  • Central banks shift to gold
  • Strait of Hormuz closure hikes oil
  • US energy exports gain from conflict
2 min read

US gold revaluation could wipe out 70 per cent of budget deficit amid West Asia conflict

SBI Research report says revaluing US gold reserves could wipe out 70% of the budget deficit as Middle East conflict fuels inflation.

"The corresponding revaluation reserves would create a massive jump in assets first, wiping ~70% of US Budget deficit. - SBI Research"

New Delhi, March 9

The United States could potentially eliminate a massive portion of its budget deficit by changing how it values its gold reserves as the West Asia conflict continues.

A recent report by SBI Research states, "The corresponding revaluation reserves would create a massive jump in assets first, wiping ~70% of US Budget deficit."

While these reserves are currently valued at prices from 1973, updating them to current market rates would provide a significant financial cushion during global instability.

The ongoing conflict in West Asia is causing significant worry for the global economy as it spreads across different regions and markets. The SBI Research report explains, "Should the raging conflict in the Middle East proliferate asymmetrically across jurisdictions, asset classes and supply chains, the cumulative shock could trigger a new wave of Inflation globally."

However, the United States is currently in a position where it could actually gain from this extended war because of its massive energy resources. By using its large oil and gas capacity and shifting supply to Europe, American companies may earn enough to cover the costs of the conflict.

The SBI Research report notes, "With the supply-supply chain triggered squeeze anchoring higher spot and forward prices across Gas and Oil, the US enterprises could reap benefits that more than adequately compensate the spending on war."

This shift is part of a larger global trend where central banks are moving their money away from US government bonds and putting it into gold instead. For the first time in nearly thirty years, these banks have significantly changed their strategy to favour gold over traditional treasuries.

The SBI Research report highlights, "Central banks are shifting away from treasuries to gold holdings. The transition happened in Jun'25 for the first time since 1996."

The closure of the Strait of Hormuz, a vital path for "20% of the world's crude oil", is also pushing energy prices higher and making markets nervous. This has led to fears that inflation will stay high, causing interest rates to remain elevated for a longer period.

The SBI Research report points out, "Increasing oil prices have raised the fear of energy-driven inflation, making markets expect a higher Fed rate for longer."

- ANI

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Reader Comments

P
Priya S
So the US benefits from war while the rest of the world suffers from inflation? This is deeply concerning. The ripple effects on global supply chains will hit our import bills hard. Petrol prices are already painful. Our government needs to double down on renewable energy and local manufacturing to shield our economy from these external shocks.
R
Rohit P
The shift of central banks from US bonds to gold is the biggest story here. It's a vote of no confidence in the US dollar's dominance. For India, this validates our own policy. We must continue to diversify our forex reserves and strengthen economic ties with other nations in the Global South. Time for a more multipolar financial world.
S
Sarah B
Interesting analysis from SBI Research. The 1973 valuation is indeed an anachronism. While the accounting trick is clever, the real issue is the geopolitical instability. A prolonged conflict in West Asia is bad for everyone. Hoping for diplomatic solutions to prevail, for the sake of global economic stability.
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Aditya G
The part about the Strait of Hormuz is scary. 20% of the world's oil! If that chokepoint closes, even for a short while, prepare for prices to skyrocket. Our strategic petroleum reserves need to be at maximum capacity. Jai Hind!
K
Kavya N
While the focus is on the US, we should look inward. This situation highlights the importance of Atmanirbhar Bharat. We need to reduce our dependency on volatile global energy markets. Faster adoption of electric vehicles and solar power is not just good for the environment, it

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