In this week’s exploration of the gold and silver markets, Andrew Maguire looks ahead to the introduction of Basel III rules in March next year and breaks down the expected global impact on banks, the gold markets and the price of gold itself.

What does Basel III mean for banks’ gold reserves?

Currently, paper gold is not a 1st tier asset. Only fully allocated physical bullion that has no counterparty risk attached that qualifies as a first-tier asset. As we mentioned earlier, Basel III rules coming into effect in March through to January 22 will eliminate any valuation haircut.

The new rules will require a provable 1:1 ratio of fully allocated gold reserves, with no counterparty risk. Under Basel III rules, every central bank will be able to revalue its physical reserves higher, from a current 50% haircut into a fully cash exchangeable asset.

Andrew Maguire believes that central banks will be able to pay off massive swathes of debt by revaluing gold. According to the precious metals expert, gold would not only act as a cash asset, but would also behove central banks to revalue the dollar price of gold.

What does this mean for the gold?

Andrew Maguire believes Basel III rules will lead to a sanctioned gold reevaluation, while ultimately driving a more physical market. In this week’s episode of Live from the Vault Andrew Maguire looks at how Basel III rules will affect the price of gold and reveals the level at which he estimates the precious metal will be revalued.

Watch this week’s Live from the Vault for:

  • New year targets for gold and silver.

  • The price liquidity providers and trading houses see silver hitting early in the New Year.

  • Insight into gold over the holiday season.

  • Physical delivery demand for COMEX gold continues to escalate.

Details on the cash settlements banks are taking for November contracts.

 

Related read: Why banks are resisting today’s new basel III gold rules

Gold bugs are speculating about the impact of Basel III regulations set to take effect next month. European banks, minus those in the all-important London markets will soon be subject to Net Stable Funding requirements. The effect may be to reduce bank activities in the paper metals markets. Marketwatch actually put together a fair summary of the regulation and its potential impacts. The new rules seem to recognize the risk associated with holding derivatives versus holding the real thing. They will be required to hold extra reserves to offset any paper metal they have on the books. Keep reading

This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.

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