– Basel III Regulations Finally Kick In: What This Means For Gold:
On Monday, the long-anticipated (by gold bulls) banking rules implemented under a sweeping international accord known as Basel III came into effect (for European banks) and – as discussed previously both here and elsewhere – mark a major change for European banks and their dealings with gold, “potentially altering the landscape for precious metal demand and prices” as MW puts it.
In a nutshell, Basel III elevates allocated gold, in tangible form, to be classified as a zero-risk asset under the new rules, but unallocated – or the hated by gold purists – “paper” gold, which banks typically deal with the most often, won’t — meaning banks holding paper gold must also hold extra reserves against it. 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.
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