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Basel III, Gold, The Dollar And The Great Reset

By Andrew LaneCommoditiesMar 15, 2021 06:16AM ET
www.investing.com/analysis/basel-iii-gold-the-dollar-and-the-great-reset-200567220?ampMode=1&__twitter_impression=true&fbclid=IwAR1W3_2ZbqJTPjdVMx4fkRVYAZFl-8gInKQPKO2br3ggfwMmrOimhkyM1MI
Basel III, Gold, The Dollar And The Great Reset
By Andrew Lane   |  Mar 15, 2021 06:16AM ET
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Basel III as outlined in my previous two articles, could lead to a dramatic change in gold prices with a serious fall out in other market sectors. With June 28 2021 approaching where the new NSFR standards become implemented, we look at how the dollar will react, and whether the Basel III implementation is a front for a much bigger macro event.
 
The most important characteristic of Basel III, the NSFR implemented by the BIS commences on the June 28 2021. The LBMA – who have tried and successfully pushed back for years – have been granted an extension to this (again) however this will likely not matter one iota as banks and countries for that matter are already signing up to compliance. Therefore while an extension has been granted to the LBMA, with the rest of the 63 countries acquiescent, it is hardly an allowance of exemption of the rules.
 
When considering the fallout this could have, at this juncture there are some analysts that believe this could be the end of the dollar (many still believe the dollar to be on its knees by the end of 2021 regardless of Basel III) and some that still cling on to its stature as the world’s reserve currency and it won’t be allowed to fail. Gold is money, and there’s an argument to say it’s a currency as its value is traded against the US dollar. If you buy gold you are effectively shorting the dollar or betting its value will decrease. Whilst there is obviously more to it than that, fiat currency has and continues to lose purchasing power over the years. Gold has always been a hedge or security against dollar debasing and inflation.
 
So how will this affect the dollar? Well there is a very interesting situation bubbling away and this comes from China. It is widely known that since the Basel III rules were announced the Chinese have been stockpiling gold. They also mine it so it is impossible to know exactly how much they have but many estimates claim around 20,000 Tonnes – way more than is currently declared.

If this is true, it well and truly trumps the USA’s stockpile. China has been trialling their new digital currency and it would make sense that this could be a pretext for a digital or cryptocurrency Gold backed format that will launch to rival or replace the dollar. It is no secret China wants their currency as the world’s reserve and in 2016 the IMF added the Yuan to The Special Drawing Rights basket. (although it sits with others and nothing has happened since) Notwithstanding this, the digital Yuan is ground breaking and could be unleashed as a gold backed currency. At the very least, the Chinese still see gold holdings as sine qua non. Perhaps their gold amassed1§ figure will be disclosed when Basel III is implemented as they see an opportunity to power in before others do.
 
Putting to one side the rumoured stockpile, China is less and less reliant upon the dollar now, and they are very well placed should it fail. However they aren’t the only big economy that is loosening ties. In the last decade Russia has dumped the dollar and quadrupled its gold holdings with Putin stating Russia is now not reliant on the US currency whatsoever. It is even rumoured there is an alliance between China and Russia on destroying the dollar. If the dollar was to fail and if the last year is anything to go by, the remainder of 2021 could see an explosion in commodity prices. History has taught us that financial systems move in cycles, and the dollar could be in its final stages.
 
So returning to the upcoming event, back in 2018 the World Gold Council stated that central banks, in response to the Basel III rule changes added 651 Tonnes of Gold to their reserves in 2018. This was a 50-year record. Bear in mind at the time Basel iii rules were scheduled to commence the next year. Before the Basel iii NSFR rules, banks holding Gold was costly and not particularly worthwhile as a Tier 3 asset. Now a Tier 1 asset, Gold is attractive to hold because it can and will be used as security to back lending, and potentially offset debt. Currently and for years the Tier 1 assets have consisted of Treasury Bonds and cash. Fiat as mentioned above loses purchasing power over time and Treasury Bonds come with other problems. Gold however carries no counterparty risk.
 
We know how manipulated futures markets are when paper trading accounts for more than 95% of market moves in gold. So what happens when paper gold isn’t traded anymore? After Basel III derivatives will still exist in the form of ETFs and such like, but it will push a physical market. The naked shorts have to unwind soon, and the price action over the last week is starting show signs of this. It may well push the end of derivatives as it could prove too costly with the new haircut imposed. So if central banks are full to the rafters with physical gold, countries stockpiling and the world reserve currency plummeting, are we heading towards a Gold backed standard again? Is the great monetary reset hidden behind Basel III? Let’s consider this possibility further.
 
Debt levels are the highest they have ever been and there is no strategy to suggest that this is going to turn around any time soon. In the US the Fed is printing $120bn a month consisting of $80bn in Treasury debt and $40bn in mortgage backed securities. I don’t think anyone believes the narrative that we are out the other end of this Covid collapse. The world GDP over the last year during lockdowns has tumbled and the jobs lost aren’t reappearing overnight. Economists are predicting anything from 2 to a whopping 30 years before we see pre Covid levels of output again. Whilst figures will suggest at the end of Q3 we have rebounded, we are nowhere near where we would be if Covid didn’t occur. The world has gone backwards, it has cost a fortune to hold together and someone has to pick up the bill for it all. There’s 180,000 small businesses in the US alone that aren’t reopening and have collapsed. At the current levels of treasury yields the US can’t pay back the interest on their loans let alone the actual debt. (Can a country be classed as insolvent?) How can that continue? So has there been a bigger plan brewing in the background for years here that we aren’t being told about? Is Basel iii going to be the answer?
 
The G20 leaders have been pushing this “Great Reset” agenda for some time. Biden even quoted the authors of the Great Reset with his “Build Back Better” motto. Kristalina Georgieva, MD of the IMF in Washington, even called for a Bretton Woods moment in Q4 of 2020. It would make sense wouldn’t it. Small banks that can’t afford to stack Gold close down leaving the cartel of the big boys to set a minimum Gold price. The higher the price of gold, the less debt the banks have. It’s like monetary magic policy. It’s so brazen you can see it happening.
 
By the time Basel IV rules kick in (January 2023) gold could have had its second revaluation event. So can you imagine a minimum price of gold, not just once, but twice? Some gold analysts have been touting this scenario for a while now. Why wouldn’t the price of Gold be used to offset debt the banks have? What other options are there? The debt clock in the US currently stands at $28 trillion, and this is not inclusive of the recently signed off Biden $1.9 trillion stimulus. This debt increases by $1 million dollars every 23 seconds. Money printing creates more available money and therefore leads to a weaker dollar. Basel III will lead to less Gold being available to trade creating a very tight supply/demand ratio.
 
According to almost all reports on net trading figures, less than 1% of traders across the world hold gold in their portfolios. What could the price of gold get to, when paper disappears and this figure jumps to even 3% of physical, let alone higher? It feels like we are on the precipice of huge change here. The banking system is broken and needs a huge overhaul, and this could be it. This Keynesian approach just isn’t working.  
 
Crazy numbers have been thrown around on what gold prices could rise to, and I’ll leave you to form your own opinion on what big industry analysts are predicting. However if we were to remove all the “could” out of the noise around Basel III, one key fact is clear: The NSFR will considerably reduce, if not completely eliminate naked shorting of paper gold by the big banks. They have to have a provable 1:1 ratio of physical gold which will be audited to trade or use it. Paper gold and derivatives will become incredibly expensive and will be traded far, far less.

This alone will lead to price discovery, a fair price for Gold. What that price is we will find out on the June 28 2021 and beyond. If the dollar does collapse then we could be talking numbers beyond our wildest dreams. No wonder many big name precious metal analysts are calling this the most significant event of their careers.

Basel III, Gold, The Dollar And The Great Reset
 

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Basel III, Gold, The Dollar And The Great Reset

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Comments (7)
John Griffiths
John Griffiths May 30, 2021 6:56AM ET
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Is this your latest article on Basil 111? What about the audit of the bank's physical gold? To confirm amounts on Bal. sheets are correct? Is this happening now? Will we hear anything? Perhaps those with shortfalls will need to buy? Why do LBMA banks need a further 6 months to be ready?  Is it confirmed that gold will definitely be treated as Cash - Tier 1 asset? I think there was some confusion over this.
Paolo Bertozzi
Paolo Bertozzi May 18, 2021 10:57AM ET
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Till open interest raises (I keep comex monitored) and prices rises is not a good sign. When we will see open interests decrease at rising prices the rocket will ignite. I have not the old data of the call/put ratio. Anyone remember the avarege ratio ? now is over 3 ... Higher it is probably better for longs. Thank Andrew.
Ahmed Elgeldawi
Ahmed Elgeldawi Apr 02, 2021 9:54AM ET
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Hello Andrew, Did you watch the videos of Andrew Maguire (live from the vault) recently as he expects that the gold price could rise to 10-15k dollars an ounce in 2023?, Do you believe this could happen after implementing Basel 3 and Basel 4?, I hope you could answer.
Michael Rothschild
Michael Rothschild Mar 16, 2021 9:16AM ET
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Andrew, thank you for the analysis of what is a very difficult topic. Did you happen to see the video on youtube or twitter  by maneco1964 yesterday saying gold is not tier 1 with Basel 3? Not sure what to make of it and curious what you think. Also, do you really think trading of paper/unallocated gold is going to have to come into the light finally? It is a multi trillion industry which won't go away unless it is forced to somehow by China/Russia/EU together perhaps who may be influencing BIS. It is come for gold to come back into the middle of the monetary disorder and it is only a matter of time. Thanks again!
Andrew Lane
Andrew Lane Mar 16, 2021 9:16AM ET
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Michael, I did see the video, and although I have a lot of time for him, I'm afraid he has made a mess of it. The source at the BIS was hardly disclosed. You just have to have a look at the LBMA's website, and how they have been kicking back on it for a while, and the reasons why. Goldandsilverpros made a video earlier this year, and he said it took him hours to find the details on the BIS website. It's clear they don't want you to know. There are articles going back as far as 2012 regarding Tier 1 Gold classification. I've no doubt that the BIS want to keep this information from public knowledge as long as possible. What I would say is that there at the turn of the year it was little known, now Basel iii and Tier 1 Gold seems to be getting a lot more coverage.
Mehdi Captain Music
Mehdi Captain Music Mar 15, 2021 6:42PM ET
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What I like the most is your last paragraph.After June we will see exciting waves.As I see the dollar is leading all currencies no matter how the economies are doing and people are acting emotionally. ( don't bet against the trend side. )People can't force the trend to change because there are many written plans to make patterns.
Andrew Lane
Andrew Lane Mar 15, 2021 11:03AM ET
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Incredibly frustrating editing here from https://investing.com. I've re read my text, and at no point did I write fold instead of Gold!
jake pennycook
jake pennycook Mar 15, 2021 11:03AM ET
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Andrew I see you mentioned the great reset in there, have you read all of the conspiracy theories around communism and the removal of private property regarding the great reset?
jake pennycook
jake pennycook Mar 15, 2021 11:03AM ET
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Hello Andrew, I noticed you mentioned the great reset - Have you read all of the conspiracy theories around this? regarding communism and the removal of private property?
Andrew Lane
Andrew Lane Mar 15, 2021 11:03AM ET
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jake pennycook Yes, I have seen these theories, but it's difficult to comment on a theory without hard substance behind it.
jake pennycook
jake pennycook Mar 15, 2021 11:03AM ET
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Andrew Lane  I do agree, I cannot find any evidence that this is an attack on our freedom and investing / free markets etc. The only evidence i can find is a video from 2016 that was based on predictions about what life could look like in 2030; and this isnt even any evidence xD...  think we will be fine xD
Paul Barron
Paul Barron Mar 15, 2021 10:11AM ET
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Thanks again
 
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