RE:Basil III effect on Gold price ?Sympathies. However knowledge is just a click away
As I see it, Basel III seeks to elimiate the loopphole whereby the banks could use paper gold carrying counterparty risk as a Tier 3 asset against its loan book. Now the banks must have the physical in the vault which will count as a Tier I asset, ie a core capital and effect its loan book capacity. The tier 1 capital ratio has to be ar least 6% of rsik weighted assets. In practical terms this monatarises the physical vale of gold. By placing a Tier 1 category on the physical it has placed an intrinsic link to $ assets
Some say it will have a major impact over time, and produce a swing towards the physical market away from the derivative market. We in the buiness of actually producing the yellow metal can only benefit. As I say the big impact is the monetarisation of gold bullion. The minimum leverage ratio is 3%.
I'n not an expert here just an observer. Put it this way, it's not going to be negative for the physical market quite the reverse.
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