So.....I guess we are crazy to be holding a silver stock like EXK
As BIS notes in its progress report on Basel III implementation:
At national discretion, 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%.
As Russ Norman – CEO of Sharps Pixley – wrote last month:
Banking capital adequacy ratios, once the domain of banking specialists are set to become centre stage for the gold market as well as the wider economy. In response to the global banking crisis the rules are to be tightened in terms of the assets that banks must hold and this is potentially going to very much favour gold. The Basel Committee for Bank Supervision (or BCBS) as part of the BIS are arguably the highest authority in banking supervision and it is their role to define capital requirements through the forthcoming Basel III rules.
In short, they are meeting to consider making gold a Tier 1 asset for commercial banks with 100% weighting rather than a Tier 3 asset with just a 50% risk weighting as it does today. ["Tier 1 assets" basically mean the most stable, bedrock risk-free type of assets which a bank can hold. The Basel III framework is an international framework which will require all banks to hold more Tier 1 assets, in an attempt to reduce future bank meltdowns.] At the same time they are set to increase the amount of capital banks must set aside as well. A double win potentially.
Hitherto banks have been much dis-incentivised to hold gold while being encouraged to hold arguably riskier assets such as equity capital, currencies and debt instruments, none of which have fared too well in the crisis. With this potential change in capital adequacy requirements. bank purchases of gold would drive up its value relative to other high quality qualifying assets, increasing its desirability for regulatory purposes further. This should result in gold being re-priced to bring it on a par with all other high quality assets.
Back in August the FED issued 'Notice of Proposed Rulemaking'. The document is 250 pages and be found at Federal Reverse under government newsevents - press. I'm waiting to see how big bank brother treats younger bank brother as lending rates are rising before the opening kick. Regardless of all I hear and see from net articles written by PM writers - there are swords casted in stones. I expect an agreement on mortgage loans to be settled on foreclosures, this needs to come first.