April Fools’ Day might be one to remember this year. I’m not talking about a prank that may or
may not occur. I’m talking about what happens on March 31 – Basel III goes into full effect.
What is Basel III? Investopedia’s quick definition is this: “Basel III is a set of international
banking regulations developed by the Bank for International Settlements in order to promote
stability in the international financial system. The purpose of Basel III is to reduce the ability of
banks to damage the economy by taking on excess risk.”
So, what does that mean for gold and silver? You may have heard some say that gold and silver
are volatile or risky and not a long-term investment, but how are they considered for the
world’s central banks? According to an article published by the Bank for International
Settlements, “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%.”
It seems that those who view gold and silver as risky, volatile and not a long-term investment
are on their own. If the central banks across the world view gold and silver as a 0% risk-
weighted asset, I tend to agree with them.
We also must wonder if this new banking requirement – Basel III – going into effect this year is
why central banks bought more gold bullion in 2018 than any time since 1967, which was prior
to the U.S. ending the gold standard.
There is only $3 trillion worth of gold in the world. The silver market is even smaller. It doesn’t
take much for the price of gold and silver to skyrocket. With these new banking regulations
going into full effect this month, I would say the biggest risk of all is to be positioned
improperly. I recommend following the path of the world’s central banks and securing your and
your client’s wealth with gold and silver before it’s too late.