Gold now considered, a Tier 1 asset for Banks...
Gold Becomes a Tier 1 Asset Class for Banks
-- Posted Wednesday, 20 June 2012 | Share this article| Source: GoldSeek.com
By Vin Maru
Misdirection by MSM as Gold Moves Towards The Banking System
Despite what the Main Stream Media (MSM) or “Financial Pundits” tell you, the gold bull market is far from over. In fact, it is just starting, in our opinion. While the misdirected financial world tell you that gold is in a bubble and it has burst, the central bankers and government organizations all know it is far from over. In fact, gold is moving towards the banking system and not away from it. We all know that many central banks are now net buyers of gold and their holdings are increasing as their need to diversify away from risky assets and foreign bonds only grows.
Central banks around the world are continuing to stock up on gold. We can now add Kazakhstan’s central bank to the grow list of bankers wanting to hold gold as a part of their currency reserve. The Kazakh central bank intends to have 20% of reserves in gold, this is up from the current 14-15% currently held. They plan to purchase 20 tonnes of gold this year, mostly from local producers. They also mentioned a few weeks ago that they would cut their Euro holding to 25 % from 30%. We can also add Kazakhstan to the growing number of central bankers which are building up gold holdings including China, Russia, Mexico, Colombia and South Korea.
The price of gold is now hitting all time highs in India, one of the biggest buyers of gold around the world. Prices have reached an all-time high of $544.74 US (Rs 30420) per 10 grams. With a slowing economy and low demand for the Indian rupee, it has been losing value lately and still remains weak. However, gold demand is still robust even at these elevated prices as investors in India still consider gold a safe haven as it counters the effects of inflation and exchange rate fluctuations.
Over the past five years, gold has provided Indian investors with a 27.19% annualized return versus a pathetic 2.67% in the equity market. This trend and move to gold has only grown in the last year. Gold assets under management by funds have increased almost 100% $1.83 billion by April 2012, last year the value was $981 million. In 2011, the gold ETFs in India saw a net inflow of $725 million. For thousands of years the Indian culture has had an affinity for gold, and that will never change, and neither will their demand for physical at elevated prices. Why? Indians understand that gold is money and a true form of saving. It’s the only way to protect assets and wealth from government theft, something the West is still learning.
Even the good ol' USSA is starting to recognize gold as a tier one asset class. The Federal Deposit Insurance Corporation (FDIC) just issued a notice regarding a new policy proposal on how banks should revise the measurement of risk-weighted assets by implementing changes made by the Basel Committee on Banking Supervision (BCBS) to international regulatory capital standards and by implementing aspects of the Dodd-Frank Act. Under the proposal the following assets would carry a zero percent risk weighting, notice how gold bullion is listed as the second item:
A. Zero Percent Risk-Weighted Items
The following exposures would receive a zero percent risk weight under the proposal: Cash; Gold bullion Claims on certain supranational entities (such as the International Monetary Fund) and certain multilateral development banking organizations Claims on and exposures unconditionally guaranteed by sovereign entities that meet certain criteria (as discussed below).
So regardless of what the MSM says, we continue to see more central bankers buying and hoarding gold. New proposals by government banking agencies are being introduced into the system and gold is included as a tier one asset to hold with ZERO RISK. All the signs are in place and what the MSM hasn’t been told yet is that gold is coming back into the banking system.
We are in a world where currency wars are being fought daily, and as the system continues to collapse under its own weight of paper printing, gold will be the go to asset and possibly the last man standing. Don’t be fooled by what the MSM says, they rarely know what they are talking about and are paid to misdirect the puppets. Gold is here to stay.