Turning Paper Into Gold

Bank of International Settlements: Gold Becomes a Tier 1 Asset Class for Banks, A Stabilizing Mechanism‎

Something’s afoot in the world of high stakes finance.
The Basel Committee for Bank Supervision (BCBS) is about to decide something crucial to bankers, sovereign nations, and gold investors alike.
As part of the Bank of International Settlements (BIS), the BCBS is reviewing the upcoming new Basel III rules. That may sound arcane to you but I promise it is not.
Though rarely discussed in the mainstream press, the all-important Bank of International Settlements is essentially a global central bank to the world’s central banks.
Its goal is ostensibly to provide global stability to the monetary and financial systems.
In a surprise twist that only a few years ago would have been considered preposterous, the BCBS is entertaining whether gold should qualify as a full-fledged Tier 1 capital asset.
Currently, the precious metal is relinquished to a Tier 3 status, deserving no more than a 50% weighting at that. Here’s why that distinction is important and potentially astonishing.
Achieving Tier 1 status would credit gold with the recognition it’s been denied ever since Nixon closed the gold window on August 15, 1971.
In essence, it would mark the official recognition that gold is real money. But that’s not the only reason gold is gaining respect. Other factors are brewing that will set the stage for the next leg up in gold prices.

My view:

With the recent breakdown in gold prices, and threat of another break lower if one looks at the charts, it is difficult to comprehend given physical supply tightness.

However, if one view this as a coordinated event designed to recapitalize the largest banks using gold as a tier 1 capital asset, perhaps the raid on the metal makes sense.

As a bank, why wouldn't you trade in fiat paper currency for gold at bargain basement prices to boost your capital assets and meet Basel 3 requirements?

Perhaps this is the answer to our dilemma with gold prices.  If so, we could expect even lower prices for the next 6 months to a year as the banks use paper products to both push the price down, and load up on the physical metal.

Very clever indeed.


  1. The reason why a gold standard is not the answer since gold and silver can be manipulated. The answer is a debt-free monetary system.

  2. I must disagree with you Anonymous. Yes, gold and silver can be manipulated, particularly with a fiat currency (debt based) financial system. But all things can be manipulated in a corrupt system, when the guardians of the currency turn a blind eye to the blatant abuse occurring with money. In my view, denationalized currencies (competing) along with gold and silver used as currencies. Such a system would be more resistant to abuse and corruption.

  3. Again, a debt-free system like what had occurred when Abraham Lincoln was president is what is needed. The U.S. needs more banks like the Bank of North Dakota where that state is running budget surpluses because the debt-free money that is loaned out goes into the real economy. PW, a world where gold and silver is used as money will not change things because banks will still control gold and silver like the way they control money in the U.S.


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