Could it be true? Have people finally realized the importance of the gold market within our monetary system? It so happens that before this may occur, gold bullion must prove to the world how easily it can interweave itself within our current fiat system as well as how meticulously it will function at the stage of consumer transaction. As such, it has not yet established the manner in which it can serve banks and the control they must have to dominate its use in a way that supports the current global monetary system. Despite the results of the World Gold Council that the demand for gold has risen markedly, that is not sufficient enough to warrant gold its merited position.
America and the Eurozone are forced to watch the horrors of their currency systems unfold adversely and both currencies will not uphold half a decade more of this downward deviation. Yet every nation’s monetary structure is dependent on our standard as well as contingent upon the Dollar as the world’s one and only reserve currency so we are all at the edge of our seats waiting for the outcome on gold at Basel III as well as in the United States which will be the precept onward for gold and silver, accordingly.
Gold has definitely been valuable to officials in the past few years in strengthening liquidity and easing loans extended to suffering countries. Gold’s interpretation from a Tier II asset to a Tier I asset has been requested by the Federal Reserve in the US and at the same time is being proposed to the Basel III Committee on monetary reform which puts it at the core of these observations as well as the focal point of the world. Should gold be re-defined this will signify that it will not hold the current 50%, but hold 100% of its value which can be accounted for on a bank’s balance sheet as mandatory assets. The significance for gold investors is that it will then operate in opposition to the greenback.
We all know that gold’s power to help the staggering fiat scheme has propagated into an exigency since 2007. No one can halt what is bound to occur. Gold must enter the picture and fast! Its purpose is quite simple and realistic because contrary to liquidating gold when the pressure sets in from bank ratios as sovereign bonds spiral downward as Tier I assets, gold would then be held by such banking institutions as a buoyancy when things are not running smoothly. If we turn back to July 2007 when credit was slammed, it was gold which stood at the front line to be sold off first and allow the banks 100% (not 50%) of their value into the bank’s balance sheets to overcome the damage left by the drooping financial worth of sovereign bonds and property linked assets. Gold would not have been sold off and the price would not have fallen from $1,200 to $1,000 if it had been specified as a Tier I asset at that crucial moment
But gold is gold and it recovered to a new peak of $1,920. Yet, how high would the price have reached if it had been defined as a Tier I asset then? Analytically speaking, much higher! What about 2012…where would it be today? More importantly, though, is that it is under the microscope for re-definition and the Basel Committee contends that January 1st is the beginning of this movement towards gold as an aid to our current monetary system. But, remember gold must hold its own as a daily operative element within the current monetary structure. Its function should not be one of turning to when nothing else works, but using it as a means of normalizing the errors of the current system once and for all. How can this work? By amassing what is not currently held by central banks. In this way, gold can be further productive in its role within the system of being more than just one of the assets set aside by central banks.
The gold market as a whole is weighing in strong as the only real alternative officials have to balance out the damage that has already been done to the current monetary system. It’s not likely that the prevailing system can stand any more mishaps which is why the yellow metal is looking more and more appealing as an exceptionally indispensable vital asset for our banking institutions in present day. The New Year should bring interesting thoughts on the matter…
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US Gold Market