After the 2008 crisis that saw Lehman Brothers and others tumble, came Basel I and Basel II.
Now, with Basel III, sudden implications for precious metals have investors excited.
If you’re wondering whether you’re in the right place to find out about gold’s immediate future and why and what the fuss is about, the answer is yes and yes. Read more about best gold IRAs here.
Here’s what’s happening in a nutshell, and why you must take a long hard look at precious metals 2.0.
From a sluggish if not risky asset, with significant or alternatively dismally insignificant price movement, gold has suddenly become a stated “Tier I” asset.
To be clear, precious metals were always the storehouse of humanity’s wealth, the traditional haven, but they weren’t seen as vehicles for short-term returns for retail investors, as prices simply didn’t follow the same dictates as company stocks or other assets.
Gold and silver were included almost as a grudge purchase in most diversified portfolios, but that attitude will need serious revision with the implications of Basel III.
Our valuation of gold is ancient, in the human spirit
Further embellishing the safeguards that were designed by Basel III and Basel II, Basel III is designed to prevent the ghastly fallout from crashes caused, in the final analysis, by recklessness and greed.
Basel III details the nature and volume of mandated trading cushions for banks, among other strengthened regulations.
Encapsulated under the notion of a “net stable funding ratio” (NSFR), such an operational cushion is designed to provide monitored and transparent reserves behind bank business, and especially their participation in the derivatives market.
What’s got investors excited, is the fact that these regulations allow for a cash or gold backing. Is it a return to the gold standard?
Yes and no.
Certainly, Basel III will change much of how gold is valued, and the nutshell is, it’s going up.
How far up?
Well, there’s another quite stark reality that’s adding to the legislative boost precious metals just received.
Quantitative Easing (QE) has been thinning out the dollar’s value, unlike anything that has ever befallen it before.
It has, and it hasn’t come home to roost yet, but the Fed and others have been running the presses, dangerously trading on top currencies’ sterling reputation, all puns intended.
Not mere FOMO, gold has never had this much going for it
Any approach that involves merrily printing money has only a few possible endings, and one of them eventually becomes reality.
All of them are terrible news for everyone, especially the citizens trying to live their lives with that currency.
While the markets have largely ignored the maths of the Banana Republic model central banks have happily embraced of late, investors will be inclined to lean into precious metals now that their currency has been so enlarged by Basel III.
Should you be uploading on gold and silver, or is it just FOMO?
Smart money is pointing out that many big institutions are in a short position right now, monetary easing like QE has indeed allowed some of fiat’s value to evaporate, and there are still derivatives and other dangerous asset bubbles afloat as alternatives.
Get into gold!
Right now, in fact.
Finally, the London interbank offered rate (LIBOR) standard is about to die.
The new lending architecture will be the sterling overnight index average (SONIA).
While consumer credit might not be cheaper－and it already seems banks are adamantly trying to pass the cost of potential losses under SONIA onto consumers－the implications for the global derivatives market might just prove to be the one additional thing that makes a gold rush happen.
All told, get into gold.
Also Check Out: Basel III Will Make Gold a Global Currency