European banks face beefed up liquidity requirements under the “Net Stable Funding Ratio’ on Monday

New banking rules, part of an sweeping international accord known as Basel III, will come into effect on Monday and mark a big change for European banks and their dealings with gold — potentially altering the landscape for precious metal demand and prices.

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5 thoughts on ““Why Basel III regulations are poised to shake up the gold market”

  1. jimh says:

    I remain unconvinced that this will have as big an impact as many believe. Many of the people I see arguing that this will have a massive impact on paper gold markets also believe that the govt through their intermediaries (ie JPM) are impacting the gold market in a negative way with flooding the market with paper gold any time there is buying interest. However, if the govt is behind the curtain impacting the price with their actions, why would the prospect of a 15% hit to the cost stop them from doing this? Say there are $50 billion shorts – 15% would be $4.5 billion is funding costs per year to continue the same game going forward. That’s a rounding error for the govt budget. Lets see what happens, but I think this is being sold as a big deal when in fact it will likely not be that big of an impact at the end of the day. I hope it is, just not holding my breath for this to have an impact on pricing of physical.

    1. admin says:

      I too have a mild degree of excitement. A bit too many “cry wolf” situations when it comes to anything about gold/silver to start trading like a real market. The banks have had time to prepare and who knows about the many potential ways to circumvent this via London etc.

      1. jimh says:

        Exactly. There are sovereign nations that have an interest in the price of gold. Most of them would like it to not go up and even drop in price. And I had a typo – its $7.5 billion at 15% of $50 billion of shorts. Still a rounding error in a budget that is in the trillions.

        1. jimh says:

          Even when looking at the 70’s for comparison the big gain did not happen until late in the decade. I suspect that when they finally lose control of the price it will be violent and quick. But when that comes is kind of a guessing game as the govt can influence markets far longer than most think is possible.

  2. Warren says:

    This reminds me of that game with three cups and a pea called thimblerig.

    Except this time the cups are clear.

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