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Are Gold-Backed Currencies Coming?

A gold bond advocate joins the US Treasury. Central banks keep buying. Iraq holds 175 tonnes. The Fed's dollars landed in Baghdad on Wednesday.

Friday, October 2. In Washington, Treasury Secretary Scott Bessent has a new counselor on his staff, and her name is Judy Shelton. For 30 years she has argued one thing: the dollar should be tied to gold again. Her best-known proposal is a Treasury bond the holder can cash in for dollars or for a fixed weight of gold. The appointment surfaced in the American financial press on September 16. It reached everybody else this week, as the 10-year Treasury yield touched 5.33%, its highest since 2002.

You hold IQD, so here is why a staffing story in Washington leads an Iraq briefing. The Iraqi dinar is priced in dollars. On Wednesday a fresh shipment of cash dollars from the New York Fed landed in Baghdad. On Thursday Bessent sat down with Fuad Hussein, the Iraqi Foreign Minister, and told him what Washington expects from Prime Minister Ali al-Zaidi. And the same day, the Arab world's bank governors elected the CBI's governor, Nizar Nasser Hussein, as their deputy chair.

The man who decides how freely dollars reach Iraq has just taken on America's best-known advocate for putting gold behind them. That is why the title of this briefing is a question. Our theory, and we have held it for a long time, is that the answer is yes. And not for the dollar alone.

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The Economist Bessent Brought In

Let's start with who she is. Trump picked Shelton for the Federal Reserve's board in 2019. The Senate stalled her in November 2020 on a vote of 47 to 50, after a long fight over her views on gold and the Fed. Before that she served as America's director at the European Bank for Reconstruction and Development and chaired the National Endowment for Democracy. Her books carry the argument on their covers: Money Meltdown in 1994, Good as Gold in 2024.

The proposal she is known for comes from a paper she published in 2012. She called it the Treasury Trust Bond. It pays no interest along the way. At maturity, which could be 20, 30 or 50 years out, the holder chooses. Take the face value in dollars, or take a weight of gold that was fixed on the day the bond was sold. If the dollar has held its value, you take the dollars. If it has not, you take the metal.

Think about what that does to the government selling it. Every year of inflation makes the gold option worth more, and makes the promise more expensive to keep. A Treasury that sells that bond has put its own gold on the line as a guarantee that it will not inflate the debt away. In the same paper Shelton wrote that other countries, and the European Central Bank, could issue gold-redeemable debt of their own.

Now look at the week she walks into. On Thursday the 10-year yield touched 5.33% before easing back. The 30-year sat at 5.63% a day earlier. The Treasury is already buying back its own long bonds to steady that market, the program we covered in A Bank Run in Baghdad. Lenders want more and more to hold American debt for the long term. Shelton's case has always been that they would accept less if gold stood behind the promise.

In July the Treasury Secretary told the country its gold is worth over $1 trillion, the moment we covered in Follow the Gold. In October he has the author of the gold bond on his own staff.

What the Gold Is Being Bought For

Ask a simple question. Why has every central bank that can afford it spent the past few years buying gold?

Poland added 82 tonnes in the first 6 months of this year. Uzbekistan added 41, China 40, Kazakhstan 27. The People's Bank of China has now bought for 22 months in a row, and its August purchase was the largest in nearly 3 years. When the gold industry surveyed 76 central banks this spring, 89% said they expect official gold holdings to keep rising over the next year. 74% said they expect the dollar's share of reserves to be lower in 5 years. And gold has passed US Treasuries as the largest asset in foreign official reserves, something not seen since 1996.

Then there is Washington itself. Since January 2025 it has signed mineral agreements with Ukraine, the Congo, Australia, Japan and over a dozen others, every one of them built around access to what is in the ground. In July it counted Fort Knox at market value. In August, Caracas and its opposition agreed that Venezuela's gold, once released from London, goes into US Treasury accounts, the arrangement we walked through in Venezuela's Gold Goes to the US Treasury.

Here is our theory. Nobody buys like this to leave it in a vault. Paper money that answers to nothing has had 55 years, since August 1971, and the bill for it is the 5.33% America now pays to borrow for 10 years. We think the next system puts hard assets back underneath the money. Gold first. Oil and minerals beside it. Digital rails on top to move it. And we think every serious currency ends up there, because once the dollar is tied to something real, every currency priced against the dollar gets measured against the same thing.

Shelton argued it from the outside for 30 years. She is on the inside now.

Where That Leaves the IQD

Apply the theory to the Iraqi dinar. If money goes back to being measured against what a country owns, the question for any currency becomes what stands underneath it.

The CBI holds about 175 tonnes of gold. That is roughly a quarter of its reserves and the third-largest holding in the Arab world, and the bank added to it in September at around $4,400 an ounce, a purchase we logged on September 10 (see 6 Million Barrels a Day). At Thursday's price that gold is worth about $23.5 billion. Under the ground sit about 145 billion barrels of oil in proven reserves.

The bank that holds the gold was given a new seat this week. On Thursday the governors of the Arab central banks elected Nizar Nasser Hussein deputy chair of their council, serving under Syria's governor. Iraqi state media called it the second-highest post in Arab central banking. Not long ago Iraqi banks were being barred from the dollar by the dozen. This week the men who run the region's money put Iraq's governor one chair from the top.

Yesterday, in IQD: The Currency of the New Babylon, we gave you our opinion that Iraq is being rebuilt to carry the region's money. A world that goes back to hard assets is the world where that opinion pays, because Iraq has the assets. What it has been missing is books that outsiders trust, and making those books trustworthy is the work you have watched all year. Our guide "IRAQ. The Case for Revaluation" lays out why the IQD is priced where it is, and it is free in our library.

The Man Holding Iraq's Dollars

Now the part of the week that touches your IQD directly.

All September the Iraqi press carried a threat: miss the September 30 weapons date and the dollars stop. Baghdad denied it twice, and we carried both the rumor and the denials in A Sovereign IQD. Wednesday was September 30. The loudest holdout had not signed. And on that same Wednesday, Iraq's government spokesman confirmed, a new shipment of cash dollars from the New York Fed arrived in Iraq, under the understanding al-Zaidi reached in the United States. Yesterday we told you no arrival had been reported. Baghdad then confirmed it on Thursday.

Per Iraqi reporting, Washington kept the cash moving for three reasons. Baghdad tightened how dollars are distributed. It pushed payments onto electronic rails. And it is winding down the old currency auction.

October 1. On Iraq's Sovereignty Day, Bessent met Fuad Hussein in Washington. The readout runs three sentences. Bessent "discussed the United States' expectations for Prime Minister Ali al-Zaidi's reforms." The two men had "a frank discussion" on Shiite pilgrimages to Najaf, on Operation Economic Outcast, and on "Iraq's progress in demilitarizing Iranian militias."

Diplomats use "frank" when the conversation was not comfortable. Read the order. The soldiers were out by last Sunday. Cash came in on Wednesday. On Thursday the expectations were read out. Our read is that the Iraq file now sits on Bessent's desk, and the tool he works it with is the dollar. Shelton has just joined that specific office.

The Street and the Budget

Baghdad's money changers took the shipment calmly. A hundred dollars opened Thursday at 156,850 IQD and closed at 157,300, against the CBI's posted 131,000. One delivery of cash does not close a gap that wide.

A bigger number sits behind it. The CBI sold $35.27 billion of foreign currency in the first 8 months of this year, against $53.83 billion in the same months of 2025. That is 34.5% less. Fewer dollars are leaving through the CBI's window, which is what the customs checks, the traveler limits and the cancelled licenses were built to do.

Iraq's Council of Ministers has not yet voted on the 2027 budget. It is due in parliament by October 15.

The Holdout Adds a Line

On weapons, Kataib Hezbollah added a line. Abu Hussein al-Hamidawi, who leads the faction and whose order to halt operations we covered yesterday, also said this: "the resistance has won this round, and the victor is the one who imposes his conditions on the enemy." The wider alliance of factions he belongs to says it negotiated for over 40 days and never got the government's answer.

Prime Minister al-Zaidi answered from the Sovereignty Day stage. The state alone decides war and peace, he said, and "the government will work to fully disarm all non-Iraqi armed groups present on Iraqi territory." He also announced that Iraq will buy a national air defense system. Remember the one exception al-Hamidawi kept for himself: shooting at hostile aircraft until Iraq has air defenses of its own. The Prime Minister has just ordered the equipment that ends the exception.

Tehran and the Markets

Next door the pressure went up again. Iran loaded no crude onto tankers in September, Bessent said on Thursday, and the ship-tracking firms recorded the same numbers, down from about 250,000 barrels a day in August. The Treasury also went after a Russia-linked money network it says moved more than $17 billion, some of it for Iran's central bank and the Revolutionary Guard.

A third American aircraft carrier, the Theodore Roosevelt, is on its way to the region, with about 2,200 Marines following aboard the Makin Island group. In the strait, a supertanker built to carry 2.5 million barrels was hit by a projectile and caught fire.

Oil answered. Brent's expiring November contract settled at $103.50. Gold closed near $4,182 and silver near $60.50.

The Read

The Liberty Bonds America sold to pay for the First World War carried a promise most people alive today have never read. It was printed on the bond itself. The principal and interest, it said, are "payable in United States gold coin of the present standard of value."

That was the deal for anyone who lent to Washington. You were owed gold at a fixed weight, and no later government could pay you back in cheaper money. Then on June 5, 1933, in the depths of the Depression, Congress passed a resolution cancelling that clause in every contract in the country, the Treasury's own bonds included. In 1935 the Supreme Court ruled that Congress had no power to break the government's own word. The same ruling gave the bondholder who sued nothing more than paper dollars.

For 93 years since, a Treasury bond has promised dollars and only dollars. The last link between the dollar and gold was cut in 1971. The inflation you have lived through, the debt, the currencies that lose a little every year, all of it grew in the space that promise left behind.

This week the economist who has spent 30 years arguing for gold behind the dollar is advising the Treasury Secretary. The world's reserve managers are still buying the metal. Washington is still signing for minerals. And Baghdad, sitting on 175 tonnes of gold and 145 billion barrels of oil, received its dollars and its expectations from the office she now works in.

Are gold-backed currencies coming? That is our theory, and it is why this channel watches gold as closely as it watches Baghdad. A dollar tied to gold changes what every currency priced in dollars has to prove. The countries with assets in the ground and books that can be trusted come out ahead. Iraq has spent this year on the books. It has always had the assets.

The order of the gates has not moved. Weapons come under the state first. A full cabinet follows. The budget reaches parliament by October 15. The rate comes last, and it belongs to the CBI.

America took gold out of its Treasury bonds in 1933. You just watched the economist who wants it written back in join the Treasury.

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