Sometimes the rules work in your favor. That is expected to be the case as the rollout of Basel III takes place in Europe and Britain. The European rollout is set to take place at the end of the month, while the British rollout will not go into effect until January.
To understand how these regulations may be bullish for gold, it is important to understand what they are and their intentions. Basel III is effectively a set of regulations for bank capital, stress testing and market liquidity. Although many of these guidelines were introduced following the financial crisis of 2008/2009, many aspects of the guidelines are only being rolled out this year.
Basel III will make gold a risk-free asset, while making unallocated gold more expensive to transact. This would seemingly make it wise to purchase physical gold, with substantial rewards awaiting those that do. Making gold a risk-free asset may strongly encourage central banks to buy more, as it may serve to balance their books.
The decision to make gold risk-free was not made recently. It is a decision that goes back to 2017, a year in which central bank gold buying hit a record of over 650 tons. The massive 2017 gold buying may serve as an illustration of how the risk-free status may cause additional buying of the metal, and a new record could very well be seen in the year ahead.
One of the most interesting aspects of Basel III is the fact that it does not classify gold as a commodity but rather a currency. This would seemingly suggest the opinion of gold has shifted, and that it is viewed as less of a risky and volatile instrument but as more of a stable form of money. This makes a lot of sense, given the fact that some believe gold is the last true form of money that exists.
With central banks essentially being given the green light to load up further on gold, there may be little standing in the way of dramatically higher gold prices in the months and years ahead. If global central banks (the most powerful financial institutions on Earth) see reason to buy and hold physical gold, shouldn’t you?
The most recent Basel regulations seem to underscore what we and other bullion fans have been saying for a long, long time. The gold market is not simply a commodity and not simply an “asset.” The yellow metal serves a very important purpose. Gold, unlike fiat currencies, can maintain its value over time. Unlike fiat money, it cannot be manipulated (creating more out of thin air), and it is of finite supply. As the Federal Reserve and global central banks continue to ruin their respective currencies, gold may be the last man standing. That makes now the time to start planning ahead. The protection of your financial future depends on taking action, and that action has never been as important as it is now.
Every single dollar you currently own and every investment you have that is dollar- denominated is likely to lose significant value in the years ahead. If the thought of paying $8 for a gallon of milk or $6 for a loaf of bread frightens you, then you need to carefully consider how your life may be affected if the dollar drops in value substantially. In our view, it is not a question of “if” but rather “when.”