Do the Bankers Want to Secretly Return to a Gold Standard?

There's been some discussion in the alternative media about how the bankers secretly want there to be a return to a Gold Standard. Why? Well from what I gathered they stole all our money with the current debt based fiat money system, and need a stable, sound money system again to be able to control everyone and everything. This isn't necessarily a bad thing for people like us since it would mean we'd probably become rich, but the entire mass of humanity who doesn't own Gold/Silver will be made extremely poor, and have nothing to fall back onto. They wont have any viable way to get out of the poor class too. We need a large and prosperous middle class to have a happy and productive society. I think this is why people like Mike Maloney want to get Gold/Silver into the hands of the middle class to preserve the middle class as much as possible.


Maybe that's what the money changers do. They don't hold any allegiance to any particular system, but jump from method/system to the next just to maintain control and wealth. That makes a lot of sense to me.

I don't know if this theory is correct or not, but it deserves some discussion. I believe its important to always question what you believe. Are we walking into a trap?

Video by SilverFuturist discussing this subject:
http://www.youtube.com/watch?v=wcZLrizf_mw

Video from a Bill Still interview:
http://www.youtube.com/watch?v=4hMlDjY7iGY

I think their secret for control is more about debt and usury than fiat.

Another key thing might be land ownership where they own the land and we must pay them rent.

They're pushing to make gold a Tier1 commodity asset, which would permenantly demonetize gold.

They are going to replace this current monetary system with another. I think we all agree with that, but do you think it will be another debt based system? Wouldn't they have to clear out all the debts to start that ponzi scheme over again, which means they'd lose a lot of their wealth? If they switched to a Gold based system they could restore confidence again (and the mass die off,) then just go right back to a debt based fiat system right after that.

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Originally Posted by Carl

They're pushing to make gold a Tier1 commodity asset, which would permenantly demonetize gold.

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Please explain. I don't remember ever hearing the classification before. I am not finding much in a quick search.

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Originally Posted by Carl

They're pushing to make gold a Tier1 commodity asset, which would permenantly demonetize gold.

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Actually, it seems to me that it then makes it closer to money as Tier 1 assets are counted 100% as cash equivalents on balance sheets. Gold as a Tier 3 asset only counts as 50% as a capital reserve asset.

So, it seems we are getting closer to Freegold!!

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Originally Posted by Shami-Amourae

They are going to replace this current monetary system with another. I think we all agree with that, but do you think it will be another debt based system? Wouldn't they have to clear out all the debts to start that ponzi scheme over again, which means they'd lose a lot of their wealth? If they switched to a Gold based system they could restore confidence again (and the mass die off,) then just go right back to a debt based fiat system right after that.

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Debt based fiats are not bad as long as savers have a vehicle for protecting their savings' purchasing power. Freegold does that!

Wash, rinse, repeat.

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Originally Posted by osoab

Please explain. I don't remember ever hearing the classification before. I am not finding much in a quick search.

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Basel standards may be changed to allow banks to hold gold as tier 1 capital


Here, the spinmeister FOFOA explains the goal.

Freegold Foundations


The object is to free central banks from holding gold as a unit of account.

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Originally Posted by Uncle Salty

Actually, it seems to me that it then makes it closer to money as Tier 1 assets are counted 100% as cash equivalents on balance sheets. Gold as a Tier 3 asset only counts as 50% as a capital reserve asset.

So, it seems we are getting closer to Freegold!!

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Yes it's 'freegold' alright. They want to make gold like any other commodity asset, something you buy with money and sell for money, their money.

The Tier 1 push is probably just further effort to artificially keep the price of gold down. As long as people speculate that gold will be just another commodity, people will be less likely to buy it.

Especially the central banks of smaller governments. Those banks are buying lots of gold, and it will be harder for the governments to get justification from it's experts to continue doing that if the commodity type is changed.

However, after the big crash I think such policies will be thrown at the window. So all these maneuvers are really just for show in the near term. I'll try to read that blog post though.

The only reason GATA would suppress the "price" of gold is if gold holds the position of Primary Unit Of Account, by which all value is derived, including the value of all other currencies, which are only Mediums of Exchange.

Gold, as the Primary Unit Of Account, has no price. A grain of gold is worth a grain of gold, no more, no less.

While gold has been "demonetized" by government edict for us in the economies of the world, central banks still hold gold as their Primary Unit Of Account and all the currencies circulating around the globe are fractional derivatives of that gold held by the CBs.

If you really want to take a trip into their messed up world of "money" then think about why the Fed "prices" gold at $42.22 an oz.

They've tried to "demonetize" gold by simply denying its role as the Primary Unit of Account and selling off chunks of it (to each other) as a demonstration of its demonetized standing but it hasn't worked because they continue to hold gold as their Primary Unit of Account.

Making gold a Tier 1 Capital Commodity Asset selling at market determined value or "price" effectively demonetizes gold and un-sticks them from all the limitations that holding gold as their Primary Unit of Account placed upon them.

That FOFOA link I posted explains it better, with lots of positive spin.

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Originally Posted by Carl

That FOFOA link I posted explains it better, with lots of positive spin.

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That was a great link. No mention of silver though...is it fundamentally different?

If the banks can make up the rules as they go along, and exist primarily to help themselves instead of performing a service to the people, it's pretty much a wash.

Not to mention when they screw up they get bailed out anyways...

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Originally Posted by vacuum

That was a great link. No mention of silver though...is it fundamentally different?

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Yes, there is a big difference; banks have no vested interest in silver as anything other than a commodity, the same status they're attempting to bestow upon gold.

It is quite possible that the bankers might want to return to a gold standard. That is, issuing paper money that is backed by some conditional claim to real gold. I have this opinion based on information concerning something called the Yamashita gold stash that was found in the Philippines at the end of WW II.

Recently I stumbled into a fascinating story about how after WW I, the bankers capitalized on everyone's desire not to have such a bloody war again, and the answer was that they should turn in all the gold to the bankers. The emperor of Japan cooperated with this scheme. There is apparently a huge gold deposit in China, and another on in Australia. The Japanese looted this gold and moved it to the Philippines in transit to Japan. The gold they stole from China and elsewhere was in the order of 2.5 million tons--a figure about 15 times greater than the commonly accepted total of all the gold that has ever been mined--around 150 thousand tons. Harry Truman hushed up the discovery of Yamashita's gold. However, the Fed had issued bonds in exchange for other people who turned in their gold to the Bank of International Settlements. There are trillions of dollars worth of bonds somewhere in chests that is a part of this mystery. I learned some of this in the video here:

http://www.youtube.com/watch?v=TlFP9oGTzBo
http://www.youtube.com/watch?v=TlFP9oGTzBo

and at the web site here:

http://divinecosmos.com/start-here/d...g/1051-g7banks

This could all be a large phony conspiracy type of disinformation, but it has many elements of truth. You need to judge for yourself or do some research as to the validity of this.


Hatha

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Originally Posted by Hatha Sunahara

It is quite possible that the bankers might want to return to a gold standard.

Hatha

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A gold standard limits bankster activities, and I don't think they're out to place limits upon themselves.

Carl--look at the Protocols of Zion, Protocol 20, para 22. They want power and control. If there are no more nation states, and all the power is in their hands, why would they care to withhold all the gold? Do a search in the protocols for gold. They know that after fiat loses all credibility, the only thing people will accept is gold. And they brag--even in 1906 that they own it all. You won't get physical gold. Just a paper promise, which to them is as good as fiat.


Hatha

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Originally Posted by Hatha Sunahara

Carl--look at the Protocols of Zion, Protocol 20, para 22. They want power and control. If there are no more nation states, and all the power is in their hands, why would they care to withhold all the gold? Do a search in the protocols for gold. They know that after fiat loses all credibility, the only thing people will accept is gold. And they brag--even in 1906 that they own it all. You won't get physical gold. Just a paper promise, which to them is as good as fiat.

Hatha

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Starving people will accept whatever they believe will get them food, like WIC debit cards.

The banks will horde gold for the very same reasons a person would horde gold. Except, the banks will be able to fractionalize their gold as "Gold Backed Savings Certificates" and sell them to the public at large.

Interesting post on ZH.

Guest Post: In A Gold Standard, How Are Interest Rates Set?

http://www.zerohedge.com/sites/defau.../picture-5.jpg
Submitted by Tyler Durden on 06/06/2012 16:48 -0400

• Bond
• Central Banks
• Guest Post

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Submitted by Keith Weiner, President of the Gold Standard Institute, USA

In A Gold Standard, How Are Interest Rates Set?

Today, short-term interest rates are set by the diktats of the central bank. And long-term interest rates are set in a “market” in which the central bank is obliged to keep coming back to buy ever more bonds, and speculators front-run the central banks to buy ahead of them. The result has been that, for 30 years and counting, the bond price has been rising, which is the same as to say that the rate of interest has been spiraling into the black hole of zero. When it gets there (and probably sooner) the entire monetary system will collapse.

This is the terminal stage of the disease of irredeemable paper currency. They have banished money (gold) from the monetary system, and the result is a positive-feedback-loop that destabilizes the rate of interest. The rate of interest has a propensity to fall, just like the value of the paper currency itself.

This leads to the question of how interest rates are set by a free market under a gold standard. This is a non-trivial question, and the answer is profoundly important as we debate what sort of role gold ought to play and evaluate the various gold standards being proposed.

If people are free to own gold coins directly, then the mechanics of setting the rate of interest are simple. Let’s define a term. The marginal saver is the saver who could go either way, either holding a bond or a gold coin. If the rate of interest ticks downward, he will sell the bond (or withdraw his money from the bank, thus forcing the bank to sell the bond) and buy the gold coin. He would rather hold the gold than commit to the time and risk for such a low interest rate. If the rate of interest ticks upward, he will buy the bond (or deposit his coin in the bank).

The marginal saver sets the floor under the rate of interest. It cannot fall below his preference or else he will vote with his gold. His preference has real teeth (unlike today).

Now let’s define one more term. The marginal entrepreneur is the entrepreneur whose rate of profit is the lowest possible, while still being viable. If his profit falls for any reason, such as due to a rise in costs, he will shut down his enterprise. One cost is the cost of capital, i.e. the rate of interest. No entrepreneur can borrow at a rate higher than his rate of profit, and the marginal entrepreneur is the first to buy the bond and sell his capital stock at an uptick in the rate of interest. He is the first to sell a bond and buy capital stock at a downtick in the rate.

The marginal entrepreneur sets the ceiling over the rate of interest. It cannot rise above his ability to pay, or else he will vote with his capital stock. He also has teeth.

Under a proper gold standard, the rate of interest is kept in a band that is not only narrow, but which is also stable over long periods of time. This is the principle virtue of the gold standard. It does not fix the level of prices, which would be neither possible nor desirable. It keeps the rate of interest consistent, which serves the interests of wage earners, pensioners, and other savers, and of entrepreneurs whose work provides the goods, services, jobs, and interest payments that on which everyone else depends (and which they take for granted).

When evaluating any proposed gold standard, one should ask the question: how will it determine the rate of interest?

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Originally Posted by Carl

A gold standard limits bankster activities, and I don't think they're out to place limits upon themselves.

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No they don't. But we are entering the Age of Aquarius and a new paradigm is upon us. Honest money will prevail in spite of the bankers. Gold will prevail in a new honest system not dominated by the Luciferian sodomites.

The top invented the gold standard or fixed exchnage rate system...but once the maximum potential inflation is reached...they then get rid of it...until the maximum potential of the floating exchange rate system is reached...then it's back to the fixed system again.

The top has ruled you all for all of recorded history...The top owns everything...

The top invest gold into the system...for every gold coin they invest they expect 5% or more out...and when the bottom can no longer supply the top with the yield of gold they demand.

Then the economy implodes...or the top can issue IOU's since the top owns the entire money supply...eventually the bottom reaches the point where they can no longer service any more debt and it becomes impossible for the bottom to supply the demand for yield by the top...and the economy implodes.

How a gold standard works...

The top employs the bottom to supply the top with all the gold wholesale...the top then marks it up and sells it to the bottom retail.

the difference between the whoelsale cost and the retail price is the yield the top lives off of...

over time the yield the top demands the bottom to supply causes the demand for Gold to constantly increase until the demand for yield becomes greater than the supply/production...and the system caves in.

Once the net producers reach their maximum potential to support the net consumers...the economy collapses...reguardless of what "standard" is being utilized.

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Originally Posted by Hypertiger

The top invented the gold standard or fixed exchnage rate system...but once the maximum potential inflation is reached...they then get rid of it...until the maximum potential of the floating exchange rate system is reached...then it's back to the fixed system again.

The top has ruled you all for all of recorded history...The top owns everything...

The top invest gold into the system...for every gold coin they invest they expect 5% or more out...and when the bottom can no longer supply the top with the yield of gold they demand.

Then the economy implodes...or the top can issue IOU's since the top owns the entire money supply...eventually the bottom reaches the point where they can no longer service any more debt and it becomes impossible for the bottom to supply the demand for yield by the top...and the economy implodes.

How a gold standard works...

The top employs the bottom to supply the top with all the gold wholesale...the top then marks it up and sells it to the bottom retail.

the difference between the whoelsale cost and the retail price is the yield the top lives off of...

over time the yield the top demands the bottom to supply causes the demand for Gold to constantly increase until the demand for yield becomes greater than the supply/production...and the system caves in.

Once the net producers reach their maximum potential to support the net consumers...the economy collapses...reguardless of what "standard" is being utilized.

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Which is why gold is not the answer. The entire paradigm needs to shift away from currently understood concepts of money with the first being competition.

The top is at war with competition, otherwise, they can no longer be the top.

It's not really about the money, only as far as it establishes control. While I do believe in monetary reform, until we rid ourselves of the elite banking scum etc we are all still F'd no matter what we do.

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Originally Posted by Hypertiger

...for every gold coin they invest they expect 5% or more out...

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So is it really all about gold for the top?

Is gold the top priority and control the second, or is control top priority and gold second?

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Originally Posted by Hypertiger

The top invented the gold standard or fixed exchnage rate system...but once the maximum potential inflation is reached...they then get rid of it...until the maximum potential of the floating exchange rate system is reached...then it's back to the fixed system again.

The top has ruled you all for all of recorded history...The top owns everything...

The top invest gold into the system...for every gold coin they invest they expect 5% or more out...and when the bottom can no longer supply the top with the yield of gold they demand.

Then the economy implodes...or the top can issue IOU's since the top owns the entire money supply...eventually the bottom reaches the point where they can no longer service any more debt and it becomes impossible for the bottom to supply the demand for yield by the top...and the economy implodes.

How a gold standard works...

The top employs the bottom to supply the top with all the gold wholesale...the top then marks it up and sells it to the bottom retail.

the difference between the whoelsale cost and the retail price is the yield the top lives off of...

over time the yield the top demands the bottom to supply causes the demand for Gold to constantly increase until the demand for yield becomes greater than the supply/production...and the system caves in.

Once the net producers reach their maximum potential to support the net consumers...the economy collapses...reguardless of what "standard" is being utilized.

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That shit flew during the Age of Pisces, but times they are a changin. The top is going to get dick stabbed when we go to a calorie based monetary system.

Gold is money, a store of tangible wealth. The gold basis is the most stable and documented of them all.

Banks do not profit by transacting in gold, if they are honorable. Banks profit by transacting in credit. Credit is unbacked and physically represented by notes. Banks can control the supply of credit and thus interest rates. Gold prevents banks from having this control, in the absolute.

Only governments committed to permament peace and stability can maintain a gold-backed coin of the realm. The act of war casts the gold standard asunder. Only a credit-based system gives government to ability to prosecute wars and engage in social engineering.

Gold will always be money and a tangible store of wealth. Honorable governments will embrace gold to back their currencies. Honorable governments do not exist.

Forget gold standard imo...(I guess it's better than nothing though)

We need a land standard. There are 2,379,964,800 acres in the U.S. according my brief google-ing session. There are about 312 million people in the U.S. If we divided this up, it's about 7.6 acres for every man, woman, and child.

But, if we decided to divide the land up according to Numbers 33:54-

'You shall inherit the land by lot according to your families; to the larger you shall give more inheritance, and to the smaller you shall give less inheritance. Wherever the lot falls to anyone, that shall be his. You shall inherit according to the tribes of your fathers.

- Everyone isn't going to be living by themselves, on their own 7.6 acres. Another issue is that some of the land isn't farmable. (which is my basic idea, people growing their own food, no money really needed) But some land will have other value I suppose, like mineral deposits? Also a ton of people won't go along with it...so ....they gotta die (?).

Then there is the matter of the Canaanites, "when you go into the land I'm preparing, take them out (paraphrased)."

Homos, adulterers, atheists (just keep quiet and you'll be alright (?)) - all dead men walking. Now you can see that even more space is becoming available.

Divide the land + farming + executing = problems solved

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Originally Posted by D sciple

Divide the land + farming + executing = problems solved

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I agree with this here, but the way you talk about doing it I don't necessarily agree with. I think perhaps something like Henry George advocated might be better.

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Originally Posted by D sciple

Forget gold standard imo...(I guess it's better than nothing though)

We need a land standard. There are 2,379,964,800 acres in the U.S. according my brief google-ing session. There are about 312 million people in the U.S. If we divided this up, it's about 7.6 acres for every man, woman, and child.

But, if we decided to divide the land up according to Numbers 33:54-

'You shall inherit the land by lot according to your families; to the larger you shall give more inheritance, and to the smaller you shall give less inheritance. Wherever the lot falls to anyone, that shall be his. You shall inherit according to the tribes of your fathers.

- Everyone isn't going to be living by themselves, on their own 7.6 acres. Another issue is that some of the land isn't farmable. (which is my basic idea, people growing their own food, no money really needed) But some land will have other value I suppose, like mineral deposits? Also a ton of people won't go along with it...so ....they gotta die (?).

Then there is the matter of the Canaanites, "when you go into the land I'm preparing, take them out (paraphrased)."

Homos, adulterers, atheists (just keep quiet and you'll be alright (?)) - all dead men walking. Now you can see that even more space is becoming available.

Divide the land + farming + executing = problems solved

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That's what is supposed to happen under a true free market: capital is deployed to maximize utility [of land]. Just doling out the land per capita will create the temporary illusion of equality. The unporductive and lazy will ultimately sell their land to the productive and innovative. Capital tends to concentrate where it is best treated.

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Originally Posted by Carl

A gold standard limits bankster activities, and I don't think they're out to place limits upon themselves.

Originally Posted by Hatha Sunahara
It is quite possible that the bankers might want to return to a gold standard. Hatha

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I do not think so, like I said 2 weeks ago, gold and ponzi do get along well.... unless masses are taught economics in high schools - the absolute rock bottom line - more of the same will happen.

look for "tuplip mania" and
"Rigged The First, and Worst, Global Financial Collapse (of the 1340’s)

Bill still is right: thats who controls the quantity... fiat, gold/silver doesnt matter....

there is no such a thing as "the sky is the limit aka speculation" becoz the NOW-PRESENTwill always win over. And as long there is speculation BUBBLES will continue to exist....

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Originally Posted by mamboni

That's what is supposed to happen under a true free market: capital is deployed to maximize utility [of land]. Just doling out the land per capita will create the temporary illusion of equality. The unporductive and lazy will ultimately sell their land to the productive and innovative. Capital tends to concentrate where it is best treated.

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Ah, but every 50 years is the Jubilee where the land is returned to the original family.

Leveticus 27:24 'In the year of jubilee the field shall return to the one from whom he bought it, to whom the possession of the land belongs.

Your logic is valid though. Since you're smart you lean to the right:

Ecclesiastes 10:2 A wise man's heart directs him toward the right, but the foolish man's heart directs him toward the left.

But:

Deut 28:14 and do not turn aside from any of the words which I command you today, to the right or to the left, to go after other gods to serve them.

I mean let's compare this to poker. If people play long enough (in a cash game, not luckbox tourney) the smartest player is going to get all of the chips. That's fine for poker as people can just leave the game, but in real life?

God cares about even the dumb (but not the wicked ldo). So...if you're a smart guy, you can rent their land for 50 years and accumulate as much wealth as you can. (so you still have incentive) But you can't monopolize the country, turn into a tyrant (or your kids) and oppress the poor.

Balance.

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Originally Posted by D sciple

Ah, but every 50 years is the Jubilee where the land is returned to the original family.

Leveticus 27:24 'In the year of jubilee the field shall return to the one from whom he bought it, to whom the possession of the land belongs.

Your logic is valid though. Since you're smart you lean to the right:

Ecclesiastes 10:2 A wise man's heart directs him toward the right, but the foolish man's heart directs him toward the left.

But:

Deut 28:14 and do not turn aside from any of the words which I command you today, to the right or to the left, to go after other gods to serve them.

I mean let's compare this to poker. If people play long enough (in a cash game, not luckbox tourney) the smartest player is going to get all of the chips. That's fine for poker as people can just leave the game, but in real life?

God cares about even the dumb (but not the wicked ldo). So...if you're a smart guy, you can rent their land for 50 years and accumulate as much wealth as you can. (so you still have incentive) But you can't monopolize the country, turn into a tyrant (or your kids) and oppress the poor.

Balance.

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Under a true free market, excessive wealth concentration is not likley when labor is priced appropriately.

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Originally Posted by mamboni

Under a true free market, excessive wealth concentration is not likley when labor is priced appropriately.

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I'd prefer land and a few hours of farm work (if I just want to feed my family and not be a huge commercial seller) over any job.

Job=slavery

The top employs the bottom to supply the top with all the gold wholesale...the top then marks it up and sells it to the bottom retail.
so does this make me one of the top .... i brought my gold at 600.00 an oz .... yahooooo i am one of the top

http://www.youtube.com/watch?v=lLzb-8v7t6I

Could this Tier 1 assets change be more for bolstering the balance sheets of large banks?

Think about it. JPM could claim all of their paper gold as 100% assets now. They can keep making paper gold and cover their losing positions from their CIO dept.

I am still going through this.


Proposed Banking Regulations Would Drive Gold Prices Higher

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There are many, many, many, many reasons why gold prices should go higher, despite claims that gold is in a bubble … and despite the fact that gold prices may be manipulated.

A giant new reason may be heading our way …

Specifically, the central banks’ central bank – the Bank of International Settlements (BIS) – is considering reclassifying gold as risk-free assets as part of the Basel III framework.

As BIS notes in its progress report on Basel III implementation:

At national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%.

(See footnote 32 on page 26).

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As Russ Norman – CEO of Sharps Pixley – wrote in May:

Banking capital adequacy ratios, once the domain of banking specialists are set to become centre stage for the gold market as well as the wider economy. In response to the global banking crisis the rules are to be tightened in terms of the assets that banks must hold and this is potentially going to very much favour gold. The Basel Committee for Bank Supervision (or BCBS) as part of the BIS are arguably the highest authority in banking supervision and it is their role to define capital requirements through the forthcoming Basel III rules.

In short, they are meeting to consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today. At the same time they are set to increase the amount of capital banks must set aside as well. A double win potentially.

Hitherto banks have been much dis-incentivised to hold gold while being encouraged to hold arguably riskier assets such as equity capital, currencies and debt instruments, none of which have fared too well in the crisis. With this potential change in capital adequacy requirements. bank purchases of gold would drive up its value relative to other high quality qualifying assets, increasing its desirability for regulatory purposes further. This should result in gold being re-priced to bring it on a par with all other high quality assets.

Currently banks have to have core Tier 1 capital ratio of 4% of which will rise to 6% from the beginning of next year. In addition to its store of value merits, central to the argument in favour of gold as a bank reserve is its countercyclical nature to most other assets in that it tends to be inversely correlated. Gold is ideal as it bears no credit risk. it involves no other counterparty and it is no one’s liability. It is a reserve asset diversifier if you like.

This is a treble win for gold – it would be a major endorsement of its role in preserving wealth and as a store of value from the highest financial authority, it would lead to significant purchases of gold by major financial institutions and it would lead to a reappraisal of its value with respect to other Tier 1 capital such as quality sovereign debt. Under the new rules gold could become a very significantly larger proportion of a reserve pool which is about to grow very much larger.

The 2 questions that come to my mind are when and how much metal – on timing Basel III kicks in from January 2013 with a further tightening in capital adequacy ratios in 2018. That said, it is not yet clear when gold’s re-rating to Tier 1 might take place.

In terms of amount of gold that could be purchased that is harder still – if we thought that say 2% of total current Tier 1 capital held by commercial banks globally might be converted into gold (forgetting for a moment about the increases in capital yet to be seen) – this would suggest that 2% of the $4,276 bn would be converted to gold. That is equivalent to $85 bn in gold which at current market prices is equivalent to 1,700 tonnes of gold.

Another way of looking at this is to consider that commercial banks would be holding gold for precisely the same reason that central banks do – and the largest 110 central banks in the world have 16% of their reserves as gold – as such a figure of just 2% is really quite a modest expectation – ultimately it will be a question of price and expectations of price change that would determine the rate of uptake in the short term.

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And the more favorable view of gold by banking authorities is not limited to BIS.

The FDIC issued a proposed rule on June 18, 2012, stating:

The federal bank regulatory agencies (the agencies) have jointly issued the attached Notice of Proposed Rulemaking (proposed rule) that would revise the measurement of risk-weighted assets by implementing changes made by the Basel Committee on Banking Supervision (BCBS) to international regulatory capital standards and by implementing aspects of the Dodd-Frank Act.
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The following exposures would receive a zero percent risk weight under the proposal:

• Cash;
• Gold bullion;
• Direct and unconditional claims on the U.S. government, its central bank, or a U.S. government agency;
• Exposures unconditionally guaranteed by the U.S. government, its central bank, or a U.S. government agency;
• Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral development banking organizations
• Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed below).

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The proposal allows banking organizations to recognize the risk mitigating benefits of financial collateral in risk-weighted assets, and defines financial collateral to include:

• cash on deposit at the bank or third-party custodian;
• gold;
• investment grade long-term securities (excluding resecuritizations);
• investment grade short-term instruments (excluding resecuritizations);
• publicly-traded equity securities;
• publicly-traded convertible bonds; and,
• money market mutual fund shares; and other mutual fund shares if a price is quoted daily.

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John Butler – Managing Director and Head of the Index Strategies Group at Deutsche Bank in London, Managing Director and Head of European Interest Rate Strategy at Lehman Brothers in London, and now head of Amphora Commodities Alpha Fund – argues:

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In what might be the most underreported financial story of the year, US banking regulators recently circulated a memorandum for comment, including proposed adjustments to current regulatory capital risk-weightings for various assets. For the first time, unencumbered gold bullion is to be classified as zero risk, in line with dollar cash, US Treasuries and other explicitly government-guaranteed assets. If implemented, this will be an important step in the re-monetisation of gold and, other factors equal, should be strongly supportive of the gold price, both outright and relative to that for government bonds, the primary beneficiaries of the most recent flight to safety. Stay tuned.

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On 4th June the Federal Reserve, OCC (Office of the Comptroller of the Currency) and FDIC (Federal Deposit Insurance Corporation) collectively circulated a memo asking for comment on their proposed changes to the regulatory capital risk-weighting framework. Section 11, ‘Other Assets’, specifies that a “zero risk weight” is to be applied to “gold bullion held in the banking organization’s own vaults, or held in another depository institution’s vaults on an allocated basis…”.

Whoa. There you have it. As it stands now it would appear that, in the near future, banks will not have their regulatory capital ratios penalised for holding gold instead of government bonds as a safe-haven, zero-risk asset.

While the fundamental backdrop for gold is highly favourable and has been for some years, as the supply of money, credit and government bonds has grown dramatically, this technical aspect of the gold market is also clearly bullish. Indeed, … if gold is re-classified as a zero-risk-weighted asset, “the price is likely to soar to a new, all-time high.” I stand by that statement. In about six months we will know whether I am right, or whether I have misread this one.

Given the potential importance for gold, I’m surprised that this announcement has not been widely reported in the financial press, alternative or even mainstream. Perhaps this is due to the fact that, at this point, the re-classification of gold has only been proposed, not implemented. The change is not due to take effect until 1st January 2013.

With interest rates near zero, however, the opportunity cost of sitting on a non-interest-bearing gold position for six months is close to zero. Yes, gold may appear to be in a downtrend and, yes, it might have been unusually volatile of late, but unless the regulators backtrack, I see this as clearly bullish for gold, enabling much catch-up to Treasuries.

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