June 28 Will Be a Huge Day for Gold

[ilovesilverireallydo]

https://www.crushthestreet.com/cts-news/mark-the-date-june-28-will-be-a-huge-day-for-gold

Quote

In order to explain this, let’s rewind the clock a couple of years. On April 1, 2019, gold was reclassified as a Tier 1 (zero-risk) asset by the Bank of International Settlements, an international financial institution owned by central banks.

This was a condition of a set of rules known as Basel III. Prior to that, gold was classified as a Tier 3 asset, meaning that gold could only be carried on banks’ balance sheets at 50% of the market value for reserve purposes.

This upgrade from Tier 3 to Tier 1 wasn’t meant to be implemented immediately, though. The big change will take place soon – in a few weeks, actually.

On June 28 of this year, under the Basel III rules, Europe will no longer classify unallocated (paper/futures) gold as a Tier 1 asset. It has to be a provable 1-to-1 ratio, which should lead to a physical gold market.

This, in turn, will allow every central bank to revalue its physical reserves higher. A provable 1-to-1 ratio of fully allocated gold reserves, with no counterparty risk, means that every central bank will be able to revalue its physical reserves higher, from a current 50% discount into a fully cash-exchangeable asset.

Interesting information for those that follow big market moves. 

[darkninja1985]

Just as I am new to the scene everything goes sky high lol

[jultorsk]

I wish I understood this better. I was just watching an old clip with Keith Weiner - he says the opposite. @Kman what's your take on this, please?

On Required Stable Funding (RSF) under Basel III https://www.bis.org/basel_framework/chapter/NSF/30.htm?inforce=20191215&published=20191215

 

[Martlet]

Not sure the full and honest picture is given on these changes, seems some commentators are using Basel III to promote a gold rush from banks, others see it as a problem.  Would need to read more into the detail of the change.

One thing stands out to me though, if banks can use 100% rather than 50% ratio on their balance sheets, they just effectively doubled their holding of that asset.  So they may see that as opportunity to reduce holdings for net same position. 

Edited June 9, 2021 by Martlet

[Zhorro]

It is cetainly going to be interesting. 

From what I have seen, allocated gold will not be on a bank's balance sheet as it is owned by someone else (so it does not belong to the bank).  However, unallocated gold will be on a bank's balance sheet as an asset BUT only at 85% of its value, whereas the bank will also have a liability to the full 100%, and so it is the treatment* of this difference of 15% that commentators are saying will drive banks away from unallocated (paper trading) gold - maybe!

There is still a debate whether Basel III will come in on 28/6/21 (in Europe - 1/1/22 in the UK) as one can imagine there is a lot of behind the scenes discussions taking place!

* in relation to a bank's Funding Ratio.

Edited June 9, 2021 by Zhorro
* explanation added

[dicker]

Will be interesting and I am not sure it will have that much impact.  

I lost any interest and trust in what Basel I and II did during 2008.  Despite the implementation of the “Three pillars”:

- Capital adequacy

- Supervision of capital adequacy

- Transparency around Capital adequacy

I saw banks that had implemented Basel, becoming insolvent very very quickly.  The Basel regulation simply didn’t account for big events - the creators were in my opinion pretty short sighted.  The average TSF member probably has a better feeling for risk and what downside risk there is   

Basel I and II in my opinion were an abject failure.  So what did the Bank of International settlements do…!   Come up with Basel III….

I did flick through the Basel III regulation (which is voluntary) and it’s highly technical and hard to understand unless you have a very deep understanding of banking  “Pyrocyclical Fical policy anyone”?

In reality, if a bank manages their risk properly they don’t need Basel - JP Morgan being a good case in point where they built a “Fortress balance sheet”, and sailed through the financial crisis of 2008 - it helped that they didn’t have huge CDO obligations but perhaps this was part of their strategy.  

Let’s see what happens - trust in gold!

Best

Dicker
 

 

 

[dicker]

Just to add to the above, in 2008, as the financial collapse occurred, I did a 48 hour shift working with a team preventing the Investment Bank I worked for settling cash and stock and other products with banks that were clearly insolvent across the world.

The Basel II team were in a corner on the same floor that I worked on.  At the end of the very torrid shift, I asked them how this had all happened given Basel II and was met with blank faces. They were all gone within a week.

Best 

Dicker

[sixgun]

This guy misspeaks in the video when he says gold required 85% Required Stable Funding. Paper gold will need that rather than the current 0%.
Allocated physical gold the institutions actually hold, this is tier 1 and so the RSF is 0%.

The obvious difference between gold in the bank's vaults and a promissory note for gold is highlighted. As i understand it the funding required to do paper gold trades suddenly jumped and this will make dealing in paper gold much less attractive.

Edited June 9, 2021 by sixgun

[Stuntman]

3 hours ago, dicker said:

(snip)

I did flick through the Basel III regulation (which is voluntary) and it’s highly technical and hard to understand unless you have a very deep understanding of banking  “Pyrocyclical Fi[s]cal policy anyone”?

(snip)

Best

Dicker
 

I think this means setting bicycles on fire, in exchange for money 😄

[Tortoise]

I doubt that much will happen on the day itself.  Surely any forward looking bank would have adjusted their positions in gold in the weeks and months ahead of the date and not just leave it to be done at the last minute, on the day? 

If that is the case, then we must be seeing/feeling any effects at the moment, I think the day itself will be a damp squib for it's affects on the price of gold.

[pricha]

I agree, probably nothing much will happen . Just as well , i don't want to pay £500 plus for a bullion sovereign 😁

[Uksilverstackers]

3 hours ago, Tortoise said:

I doubt that much will happen on the day itself.  Surely any forward looking bank would have adjusted their positions in gold in the weeks and months ahead of the date and not just leave it to be done at the last minute, on the day? 

If that is the case, then we must be seeing/feeling any effects at the moment, I think the day itself will be a damp squib for it's affects on the price of gold.

Agree 100%. This has been going on for years with Basel I,II and now III, its already been baked in to where we are today.

[Paul]

I predict silver will go down, cos that day ends in a Y 

[HerefordBullyun]

Just send In Basel Fawlty the IV he will sort it!

[Alfschumway]

Been reading your omments on here for a while guys  , and learning a lot 

saw this today and would like your thoughts on how this will tie in with  bullion..

We told you! France and Germany furious at hated EU rules - nations lead fresh fightback (msn.com)

 

 

[HerefordBullyun]

https://www.reuters.com/world/china/britain-carves-out-exemption-gold-clearing-banks-basel-iii-rule-2021-07-09/

Well guess Basel III is NOT really worth the paper its printed on - guess what US will follow fact. Let the manipulation continue.

If you dont believe the games rigged now, you better believe it is! 

Edited July 9, 2021 by HerefordBullyun

[eblend]

Oh.  So nothing happened, basically?

[HerefordBullyun]

45 minutes ago, eblend said:

Oh.  So nothing happened, basically?

When you have banking cartel on the LMBA and also the rule markers are also ex banking cartel. What does this tell you? The FCA is the same.

Cartel is right word for these lot. Same as the largest top tax havens, In addition to the UK, four of the top 20 tax havens in the world—Cayman Islands, British Virgin Islands, Guernsey, and Jersey. Cayman islands being the biggest in the world ranked number no1 and all this cartel are shovelling thier money out of the system here. Cretins.

[GoldenGriffin]

Basel III is currently a voluntary framework and could start to take affect / actually implemented in 2028 (6 and a half years from now).

See this video (Stuart Englert) in this thread / post.

Click the very top link in bold text.

 

Edited July 10, 2021 by GoldenGriffin
.

[GoldenGriffin]

And here are my thoughts on it being voluntary, for what it's worth...

Again click the bold text at the top.

 

[Stacktastic]

4 hours ago, GoldenGriffin said:

Basel III is currently a voluntary framework and could start to take affect / actually implemented in 2028 (6 and a half years from now).

See this video (Stuart Englert) in this thread / post.

Click the very top link in bold text.

 

I don't think I did get it wrong then?? I know BS when I see it. 
I think as the gold price closed under 1800 it should be an interesting week or two ahead. 😛

I bought 200 shares in Kinross on Thursday but will double/tripple that if or when if bottoms & do the same for Equinox Gold as that has a lot more to go IMO..  
I'm happy I waited now, although March may have been a better opportunity.

I think we have seen a false break out last week and we could see a real sell off Monday - depending on asian markets. 
I cant see any major longer term slumps given the fundamentals, but I may be very wrong, but gold is hated still & the oil of 2021 maybe??

Edited July 10, 2021 by Stacktastic

[GoldDiggerDave]

They will do everything to kick us normal  gold holders out of the market before any revaluation.

 

 

 

 

[GoldDiggerDave]

I’ve been following Basel 3 and trying to anticipate the direction of the market, I can’t see any overnight changes.  
 

if there was a move to revalue gold, I would expect this to be done slowly, slowing production, increasing premiums and possibly use vat as a further deterrent for the small none institutional investor. 
 

I think we would see some strong indicators that gold was going to be revalued however systems  will be put in place to stop the “plebs” having a piece of the action.  
 

Even some negative reports in the media about gold being used for money laundering, they are attacking crypto with the same mantra.  For me if I see these indicators it’s time to strap in and watch it take off.  I just hope it wi be still legal to sell……well it’s not the first time governments have pulled that trick. 
 

[Geovest]

Watch what the Russians and Chinese are doing. They are both still buying gold and reducing USD reserves. 

I agree that there will probably not be a quick uplift in gold, although it is possible, but in the medium term will increase substantially.

[SidS]

To be fair though (even though I have my doubts about anything changing under Basel III) it doesn't kick in in the US or UK until January 2022 does it?

Maybe when everyone is following it something might happen...

However as a cynic I can't help but think something designed by the people in the system will look after the people in the system. I bet it's just a rebrand.