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Under Basel III gold would become a Tier 1 asset or a zero-risk asset for banks
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The increased demand for physical gold is projected to push up the price of shiny metal within the next six months to two years
With Basel III regulations set to come into effect on June 28 and the other economic indicators favorably placed, there is once-in-a-decade moment to buy gold.
Under Basel III, or the Third Basel Accord or Basel Standards, gold would become a Tier 1 asset or a zero-risk asset, for banks. What is more, under the regulations, gold is not even treated as a commodity but rather as a currency.
The gold must, however, be physical and held in the institution’s own vaults. It should not be in paper form or owned and leased by someone else.
In 2017 when it was announced that gold would become a Tier 1 asset under Basel III, the central banks bought 651.5 tons of the shiny metal, a record amount over the last 50 years.
The increased demand for physical gold and the elimination of the use of unallocated precious metal are projected to push up the prices of gold and silver within the next six months to two years.
Another favorable economic indicator is the marked drop in the dollar’s value. For the fourth time in 7.5 years, the DXY index has hit the 90-point level. It is the US dollar’s long-standing support and any decline below this level could push the currency further down by 10 percent.
For a full decade, since 2011, the dollar has been in a bull market. Now, for the first time since then, we could be entering a real downward trajectory for the currency.
With gold and USD sharing an inverse relation, a weak dollar is poised to trigger a rally in gold.
Other positive indicators are the declining Consumer Price Index which is at its 40 year low and the growing US Quits Rate signaling a boom time for the American worker and the US economy.