A key change for global banks is looming – could it change the outlook for gold?
“But there’s another event which has so far snuck under the radar of most analysts and investors – the pending changes to Basel III rules surrounding gold stockpiles held by global banks. The rule change will stipulate that banks can only count physical gold when calculating their Tier One asset ratios to meet financial stability regulations.”
USAGOLD note 1: On Friday, we posted an opinion piece from Numismatic News that noted the potential for major repercussions in the gold and silver markets from the upcoming implementation of Basel 3 beginning toward the end of June. This Stockhead article suggests that the jury is still out on Basel 3 based on one analyst’s discussions with gold mining companies and derivatives traders.
USAGOLD note 2: Though we would like to think that the new accord would force bullion banks to relinquish or cover their positions causing a jump in gold and silver prices, we recognize that the implementation of this agreement is a complicated matter and it is impossible to know how the parties will react and/or the options available to them. That said, the LBMA itself – the organization whose members will be most directly affected by Basel 3 – warns of potential chaos in the gold and silver lending markets once it is implemented sends a message worth noting. That warning, we should add, is contained in its appeal to the Prudential Regulation Authority to curtail implementing the precious metals provisions. Thus far, the PRA has not responded, but as we said in the note accompanying Friday’s note, one would think that by now, its net effects on the banking industry would be well understood and factored into the equation.
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