The Bundesbank wants its gold back and the move got us thinking. The obvious plots are in the currency fear and James Bond nemesis spectrum. The fact that the German's would want the hardest currency in a fiat world is not too far from Dr. Evil attempting to heist the metal while in transit.
Here's what I was wondering (and tossing around with Twitter personality @IvantheK):
First a few factoids. In 1973 the US marked up its gold to $42.22/troy ounce and (if it exists) has been valued there since. In 2009, Bob Eisenbies of Cumberland Advisers and me asked about this line item to Treasury Dept officials, one of whom may or not have been the Sec. depending on the official record of him being there or not. Working backwards from the $11B amount line on the balance sheet the holdings-never verified mind you - amount to 261,499,000 troy ounces. That's about 8100 Tonnes of gold (is it all "fine"?) The Treasury has in past revalues immediately monetized the action through gold certificates to the Federal Reserve Banks and SDR accounts.
The question is at what value will the Bundesbank accept the gold it is transferring back onto its account? If- and if this if were a but it'd be Kardashian in size- the Bundesbank were to mark to a higher level, the Target 2 implications would become more obvious and a window would open for the US. We could also "mark up" the balance and Ivan and I think, the benefit would accrue to the Fed. The Fed could then dividend the windfall back to the Treasury freeing up the ability to borrow.
I expect smarter folks will tell us how dumb we are for thinking this quickly, enjoy.