Loading ...3- Why Basel III regulations are poised to shake up the gold market
Allocated gold, in tangible form, will essentially be classified as a zero-risk asset under the new rules, but unallocated or “paper” gold, which banks typically deal with the most, won’t — meaning banks holding paper gold must also hold extra reserves against it, said Brien Lundin, editor of Gold Newsletter. The new liquidity requirements aim to “prevent dealers and banks from simply saying they have the gold, or having more than one owner for the gold they have” on the balance sheet. Under the new regime, physical, or allocated, gold, like bars and coins, will be reclassified from a tier 3 asset, the riskiest asset class, to a tier 1 zero-risk weight Source: Marketwatch
- Takeaway 1: Buy Gold!
- Takeaway 2: Slow down, this has been known for years. Nobody is getting blindsided.
- Net-Net: Gold will appreciate annually more readily now, but volatility to the downside will increase as the industry consolidates. Cost basis will increase making it harder for smaller players to participate. This will be good for stackers, and big banks. ITwill be bad for leveraged hedge funds and smaller end user.
https://www.zerohedge.com/news/2021-06-26/gold-weekly-basel-iii-countdown