Monday, July 23, 2012 6:09:26 PM
Interesting article
Gold to Be Reclassified in the U.S.
Thursday, June 28th, 2012
By Michael Lombardi, MBA for Profit Confidential
I recently wrote in these pages about the Bank of International Settlements (BIS) proposing to reclassify gold bullion as the safest and the highest quality of asset for central banks and all other banks around the world: Tier 1 capital.
Regardless of how the central banks wish to classify gold bullion, it is the market that will eventually decide the value of gold bullion, which has retained its value and played a significant role as a monetary asset for 5,000 years.
The central bank in the U.S.—the Federal Reserve—has recently released a memo to possibly change the status of gold bullion in this country. (Source: Federal Deposit Insurance Corporation, June 18, 2012.)
Currently in the U.S. and in many parts of the world, gold bullion is classified as a risk asset on which banks are allowed a 50% weighting. This means that for every $1.00 of gold bullion held, $0.50 worth is recognized as value on the books of the banks or central banks. The whole $1.00 is not recognized, because there is a risk, according to the classification, that gold bullion could lose its value rapidly.
Again, these are classifications created by central banks and have no bearing on the true value that the market will place on gold bullion.
Still, it is significant that the U.S. is proposing to reclassify gold bullion as a zero-risk asset, as early as January 1, 2013. This means that gold bullion will join the very short list of assets considered zero-risk by the Federal Reserve: U.S. Treasuries; the U.S. dollar; and assets and/or claims with the International Monetary Fund.
So the central bank of the U.S. has joined the BIS in raising the status of gold bullion. Should the reclassifications indeed be instituted in 2013, it should increase demand for gold bullion by the banks here in the U.S., as gold bullion would be worth dollar-for-dollar on the balance sheet what a particular bank paid for it.
Furthermore, there is new legislation for banks around the world with Basel III. Basel III requires banks to increase their holdings of Tier 1 capital. If gold bullion is reclassified as Tier 1, then the banks can now use gold bullion as a diversification from other assets on their balance sheets.
Central banks around the world are taking steps to reclassify gold bullion to the status that is has held for 5,000 years: money. The proposed and very significant change by the Federal Reserve here in the U.S. should increase the demand for gold bullion and subsequently the price for the yellow metal. (Also see: “Japanese Pension Fund Buys Gold as Currency.”)
Recent GOLD News
- Lumwana’s Super Pit Expansion Officially Launched • GlobeNewswire Inc. • 10/02/2024 06:51:40 PM
- Barrick and Mali Reach Agreement to Settle Disputes • GlobeNewswire Inc. • 09/30/2024 06:35:12 PM
- Porgera Mine Working with UN and Enga Provincial Government to Provide Humanitarian Aid to Violence-Stricken Province • GlobeNewswire Inc. • 09/20/2024 03:35:21 PM
- Barrick Continues to Unlock Value Embedded in Its Asset Base • GlobeNewswire Inc. • 09/17/2024 05:00:29 PM
- Feasibility Study on Lumwana Super Pit Expansion Expected by Year-End • GlobeNewswire Inc. • 09/11/2024 09:00:00 PM
- Key Projects Advance as Barrick Keeps Tight Focus on Value Creation and Growth • GlobeNewswire Inc. • 08/12/2024 10:00:00 AM
- Barrick Declares Q2 Dividend and Buys Back Shares • GlobeNewswire Inc. • 08/12/2024 09:59:00 AM
- U.S. Futures Steady as Markets Await Key Inflation Data, Oil Prices Climb • IH Market News • 08/12/2024 09:47:41 AM
- Mining Plays a Vital Role in Advancing the UN’s Sustainable Development Goals, says Barrick • GlobeNewswire Inc. • 08/02/2024 06:45:39 PM
- Porgera Remains On Track Despite Mulitaka Landslide Challenges • GlobeNewswire Inc. • 07/25/2024 11:00:00 AM
- Higher Q2 Production Puts Barrick On Track to Deliver 2024 Targets • GlobeNewswire Inc. • 07/16/2024 11:00:00 AM
- Barrick Continues to Invest in Mali • GlobeNewswire Inc. • 07/09/2024 07:00:00 PM
- Exploration Success, Capital Investment and Reserve Growth to Sustain Kibali’s Production Profile • GlobeNewswire Inc. • 07/02/2024 04:00:00 PM
- Barrick and Zijin Contribute $1 Million to Support Papua New Guinea Landslide Victims • GlobeNewswire Inc. • 06/07/2024 11:18:39 AM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/29/2024 08:01:04 PM
- Barrick’s Sustainability Strategy Delivers Real Value to Stakeholders • GlobeNewswire Inc. • 05/15/2024 11:00:00 AM
- Barrick Announces Extensive Exploration Partnership with Geophysx Jamaica • GlobeNewswire Inc. • 05/01/2024 10:15:00 AM
- Barrick to Ramp Up Production As It Remains On Track to Achieve 2024 Targets • GlobeNewswire Inc. • 05/01/2024 10:00:00 AM
- Barrick Declares Q1 Dividend • GlobeNewswire Inc. • 05/01/2024 09:59:00 AM
- Barrick Announces Election of Directors • GlobeNewswire Inc. • 04/30/2024 08:15:55 PM
- Barrick On Track to Achieve 2024 Targets • GlobeNewswire Inc. • 04/16/2024 11:00:00 AM
- Notice of Release of Barrick’s First Quarter 2024 Results • GlobeNewswire Inc. • 04/09/2024 11:00:00 AM
- Strategy-Driven Barrick Builds on Value Foundation • GlobeNewswire Inc. • 03/28/2024 09:20:38 PM
- Barrick Hunts New Gold and Copper Prospects in DRC From Kibali Base • GlobeNewswire Inc. • 03/20/2024 02:00:00 PM
- Barrick Opens Academy at Closed Buzwagi Mine • GlobeNewswire Inc. • 03/18/2024 08:00:00 AM
North Bay Resources Announces Assays up to 5 oz/ton Gold, 1.5 oz/ton Platinum, 0.5 oz/ton Palladium, and 0.5 oz/ton Rhodium at Mt. Vernon Gold Mine, Sierra County, California • NBRI • Oct 4, 2024 9:15 AM
Basanite, Inc. Appoints Ali Manav as Interim Chief Executive Officer • BASA • Oct 3, 2024 9:15 AM
Integrated Ventures Announces Launch of MedWell Facilities, LLC and Lease Agreement with Giant Fitness Clubs • INTV • Oct 3, 2024 8:45 AM
Beyond the Horizon: Innovative Drug Combinations Offer New Hope for Alzheimer's and More • NVS • Oct 3, 2024 8:45 AM
SMX and FinGo Enter Into Collaboration Mandate to Develop a Joint 'Physical to Digital' Platform Service To Enhance Natural Rubber Industry's Ability to Report on Sustainable and Ethical Supply Chains • SMX • Oct 3, 2024 7:00 AM
Transforming Alzheimer's Treatment: Innovative Combinations to Boost Cognition • PFE • Oct 2, 2024 9:00 AM