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The Basel III recommendations for global banking sector is no way going to impact gold prices as the status of the precious metal has remained 'a risk less' asset in 

17 Jan 2013

NEW YORK (Commodity Online): The Base III norms may not have any impact on the ongoing bull market as Gold was considered ‚riskless asset, according to Przemyslaw Radomski, CFA Founder, Editor-in-chiefl of Sunshine Profits.

The Basel III recomendations have categorised assets in to Tier 1 and Tier 2 abolishing the tier 3 introduced in Base II recomendations.

Under these recommendations gold remained eligible collateral with a haircut of 15% just as it was under Basel II. Moreover, the announcement of the U.S. Federal Deposit Insurance Corporation (FDIC) made on June 18, 2012 and stating that gold bullion is a “zero percent risk-weighted items” (an item perceived as “riskless,” similarly as Tier 1 capital) brought “no change to banking capital rules with respect to gold” as the FDIC spokesperson claimed. So, gold was considered “riskless” in the U.S. under Basel II recommendations and it will remain considered this way under Basel III provisions, Przemyslaw Radomski said.

Basel III does not, in any significant way, change the way the U.S. regulator sees gold.

-Gold has not become the legal tender in any country adhering to the Basel III rules.
-Basel III is not a shift toward a gold standard, contrary to what has been rumored.
-The general regulatory trend in the EU seems to point to the inclusion of gold as a “riskless” asset.

What does all of this mean for you? Generally speaking, if gold is officially confirmed as a “riskless” asset by the EBA, then an increase in demand for gold may be seen in the EU. Such an increase, however, would not be a main driver of the price of gold. So, Basel III is not a major factor in the continuing gold bull market. Favorable fundamentals for gold, even without a positive impact from Basel III, are still in place and the long-term trend remains up, Radomski added.

(Photo Courtesy: Bigstockphoto.com) 


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