Email of the day on gold as a Tier 1 asset under Basel III
Comment of the Day

January 25 2021

Commentary by Eoin Treacy

Email of the day on gold as a Tier 1 asset under Basel III

You mentioned that gold should be higher. I understand that there is effectively a "put" on gold, die to shorts being able to be placed - using unallocated gold - which are naked. But that the Basel 3 Accord which should be in place in June will reduce unallocated gold to a tier3 asset.

Gold I understand being elevated to a tier 1 asset (as for cash).

This surely means that the demand for physical gold (already in demand with orders not being filled) will surely surge.

Are we therefore positioned to make a killing on gold between now and June?

Eoin Treacy's view

Thank you for this topical question. The announcement that gold would be recategorized as a Tier 1 asset under Basel III occurred two years ago. That begs the question whether the outsized demand from central banks since early 2019 was in response to the announcement and in preparation for the changeover in June 2021. I suspect Russia’s outsized purchases over the last few years were influenced by this change over.

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