VS 3X Gold fka UGLD

[Scandle34]

The Arbitrageur: Gold Sea Change


I averaged up here.

http://seekingalpha.com/article/795031-the-arbitrageur-gold-sea-change?source=email_macro_view&ifp=0

For whatever reasons (we can only imagine the desperation and panic) they have decided to allow this first incremental step towards the re-monetization of gold. I don't know how often a proposed new rule is enacted and then quietly dies, but the fact that this one was proposed by Basel and three US regulatory agencies at the same time convinces me that it is a Done Deal. Banks will now have another asset that they can hold without "opportunity cost" (i.e. over-allocating regulatory-defined reserves).

I would go farther and speculate that the banks and regulators have discussed the idea that the gold price is rising inexorably. If the banks can get some gold onto their balance sheets now, then they take advantage of the rising price to re-capitalize themselves.

In any case, this is just a lead-in to the main point. When these changes become law, banks will begin buying gold. This is new demand for gold at the margin, and thus the price will rise. Speculators are not stupid, and so they will front-run the banks. Gold will get more good press, and so average people will go out and buy gold. It is logical to think that some banks may even try to front-run the front-runners and buy gold in anticipation of the rule taking effect.

Given gold's price performance this Spring and Summer, I think it fair to say that this process has not yet begun. I have no idea how long it will take for this proposed rule to become law, though looking at the macro environment I do not think it will be years.