Basel III is an internationally agreed-upon set of measures developed by the Basel Committee on Banking Supervision in response to the financial crisis of 2007-09.
One of the biggest changes for gold is that the precious metal is being reclassified from a Tier 3 asset, which is the riskiest asset class, to a Tier 1 asset, which is currently designated for cash and currencies.
This is because Basel III includes the new Net Stable Funding Ratio needs to be held by banks against the financing and clearing of precious metals transactions.
For example, if a bank has $1 billion in gold positions, with $300 million in allocated gold and the other $700 million in unallocated gold.
“Under Basel III, the bank would have to show that 85% of this $700 million is actually sitting on their balance sheet, and the bank is not touching it,” Carrasco explained.
Unallocated gold is like a form of credit, she described.
They are saying to the buyer — ‘I promise you that I owe you gold.
Also, unallocated gold can be sold 20 times to 20 people, whereas allocated gold can only be sold once.
And if suddenly the eyes turn to the allocated gold, there should be an increase in demand in physical allocated gold.
“The biggest impact might be visible at the end of the year before January 1, if Basel III kicks in in the UK.
“If people turn to allocated gold, liquidity will be squeezed, and prices should go up.
“Goldex has launched the world’s first ‘plug-and-play’ marketplace solution enabling companies to offer allocated physical gold.
Within 6-8 weeks, a company can integrate into our platform, and they can be up and running selling gold to their own clients within 6-8 weeks.