Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
An intelligent and informed post iceberg...at least you know what you are talking about...
Just a couple of observations...
1 The new rules allow 0% if gold is matched on both sides of the Balance Sheet...as someone pointed out "The US position under Basel 2 and 3 is that gold can be 0% RSF if the holding is offset by gold liabilities, so holding physical and selling paper short. "...this seems to argue in foavour of dumping paper gold (which is only 2% backed by physical) in favour of physical gold
2 The argument that central banks would get together to revalue gold, to the benefit of their balance sheets and capital adequacy is a powerful one
3 If, as you imply, there's no real incentive for banks to hold gold, for the reasons you state, there is no reason for anyone to hold Bitcoin, which has no inherent value whatsoever...is consuming more power a year than Argentina...and is highly volatile
4 As is implied by your and other posts, capital adequacy in general got easier after 2008 rather than tougher and there was not the proper separation of function that there should have been in the US...if the US Investment banks 'collude' to buy gold, they could make massive gains which are inherently safer than CDOs for example of which the US economy is awash...
AIMO as usual...
More Importantly --- When will SOLG SP increase?
Thank you Iceberg for a well voiced opinion on Basel 3. I have no idea why people believe rubbish written about the effects of Basel 3 on the gold price.
Having implemented Basel 1 and 2, as well as managed the daily transfer and monitoring of the T1 account for a global bank. I can't see that many will hold gold, a) its costly to store. b) most bank use their T1 asset pool. For example the bank I worked for, would use the 8bn or so during the day, then at 4pm UK time it would transfer the money to cover the T1 back to the ECB account, then use it again the next day. A bending of the rules, but within them, as the money covering The T1 was measured at midnight each day. During the day it would be used to cover all kinds of positions, mostly to other banks, who would have to pay it back by 3pm.
If you think about it, a bank like Deutsche Bank, would make payments for hundreds of banks around the world each day. most of the banks would have open positions with DEUT which would need to be settled through EBA, SWIFT, Target etc. why not use your T1 money, that you have to put aside to do this, during the day? Which is in fact what all the large banks do. I know this is what BARC, DEUT, JPMO, HSBC, CITI do. You can't if its gold.
It makes a mockery of the entire requirement, but was within the rules. If you've got Gold, you can't do this. You can't collateralise against it. You can't do jack. Also if gold went down in value, you would have to keep topping it up with other Tier 1 category instruments, banks wouldn't want this level of uncertainty.
The relevant point for commercial banks under Basel 3 is the NSFR, for which purpose of gold will be classified 85% required stable funding factor, increased from 50%. This makes it more costly to hold gold as an asset because the funding requirement is higher. The US position under Basel 2 and 3 is that gold can be 0% RSF if the holding is offset by gold liabilities, so holding physical and selling paper short.
I think the interesting thing is that central banks have been buying gold for several years now. Don't think Basel 3 is going to cause commercial banks to suddenly start buying gold, as it will be costlier to fund.
Zoros the article is wrong, as Redknight says it doesn't have to be tier 1.
Do you understand capital lending ratio 1, and why Basel 2 was a disater.
You are reading part of it with no understanding.
When we went to Basel 2 in 2005, it meant that the capital that was held by banks, was cut by nearly 2/3rds.
Quades, babes:
"...Zoros the post on basel 3 you posted is incorrect, gold will not be moved to become a tier 1 asset, tier 1 refers to the lending ratio's...."
Try this as well:
https://www.fxstreet.com/analysis/what-will-basel-iii-rules-mean-for-the-gold-price-202012181719
"...Currently, paper gold is not a 1st tier asset. Only fully allocated physical bullion that has no counterparty risk attached that qualifies as a first-tier asset..."
Stop fiddling around the edges with lending ratio's....Physical gold will become a Tier 1 asset as of March 2021.
Banks will revalue gold. Gold will go exponential as a consequence to absorb everyone's debt.
Z