Why do the new Basel rules seek to eliminate the massive unallocated gold and silver markets? From Tom Luongo at tomluongo.me:
Last week both Martin Armstrong and Alistair MacLeod wrote about the changes to the Basel III rules and how they will greatly affect the physical and paper gold markets if implemented in their current form.
MacLeod’s article from last week is an excellent primer on the definitions and inner workings of the rules, the gold market and the changes to the rules. The short redux is that the advantage to using unallocated accounts, savings accounts which are linked to gold by holding futures contracts, will end.
We’ve discussed parts of this in the past. The process of creating fake supply to control the price of gold is on the line with these rule changes.
These rules are coming at the end of June for the European Banking System which will adopt the new Basel III rules. In short, the incentive to have exposure to gold as a pile of credit will go away if the banks can’t use any of that as part of their reserve calculations for their ASF – Available Stable Fundings.
Moreover, any physical gold they hold will be held at a 15% discount. Bottom line: these rules will make it impossible for the LBMA member banks to hold any exposure to unallocated pools of gold derviatives –futures and swaps — on their balance sheets.