Why the Basel 3 accords cannot increase the prices of gold and silver
In last week’s column, I laid out the prospect that new banking regulations called the Basel 3 accords could make it virtually impossible for big banks to continue trading massive volumes of unallocated precious metals. These new standards apply to 10 non-UK European banks that are members of the London Bullion Market Association at the end of June this year.
The widespread reduction or elimination of banking trading of precious metals stored in unallocated accounts would severely cripple the ability to suppress prices of precious metals, especially gold and silver.
As I indicated in the last column, the US government is the biggest beneficiary of the drop in gold and silver prices. Therefore, he has a lot of pressure to find a way to continue to manipulate the prices of precious metals, although he may have lost the major strategy he has used so far to do so.
In a Federal Reserve Bank document dated April 5, 1961, an unidentified senior Fed official explained that U.S. foreign exchange and gold trading would not have the desired impact on market manipulation at unless the information about these transactions is secret. To keep such activity secret, the government could use various tactics. First, it could delay the release of information. Second, it could mask business activity by combining it in relationships with other financial activities. Even more frightening, however, this document hinted that the government might also not report certain activities.
A document published in 1999 by the International Monetary Fund (IMF) confirmed that official interventions in financial markets would only have the greatest impact if investors and the general public were not aware of such manipulation.
Therefore, in the absence of massive unallocated gold trading, how could the US government still keep gold and silver prices down after the new regulations come into effect? Basel 3 bank?
It turns out that the federal government has several tactics to do this.
First, the Secretary of the Treasury could use the billions of dollars in assets from the Exchange Stabilization Fund, created as a provision of the Gold Reserve Act on January 31, 1934. This Act explicitly authorizes the government to use its resources. assets to secretly manipulate the price of gold.
He could persuade other central banks to liquidate some gold reserves, to help private banks build up their reserve requirements to meet Basel 3 reserve requirements. The Bank of England has sold half of its 1999 reserves. to 2001 to temporarily keep prices down.
Central banks could also increase their gold leasing and swap activities, especially if they could avoid reporting such activity or fraudulently refuse to disclose it. In the past, the IMF required that the central bank that had custody of leased gold and a central bank that had leased gold publish reports indicating that leased gold was part of their official reserves. Several years ago, the IMF changed this requirement to allow (but still not require) that only the central bank that held the physical gold title to declare it as part of its reserves.
The Bank for International Settlements could also expand its gold swap operations to make it appear that private banks held more gold reserves than they actually did.
Finally, the federal government could simply engage in secret operations behind the scenes to defraud investors and the American people of the amount of bank reserves. It wouldn’t be the first time that she has concealed her financial activities. A major recent example is the Federal Reserve Bank’s program launched in September 2019 to inject liquidity into the overnight bank lending system for amounts now totaling over $ 6 trillion. The Fed refused, as required by the Dodd-Frank Act of 2010, to inform Congress of the identity of the banks that received these loans, let alone the amount.
At first glance, it may appear that the provisions of the Basel 3 accords risk collapsing the market for trading in past unallocated metals, resulting in higher prices for gold and silver. But, in practice, the US government could take steps to delay or reduce price increases in gold and silver when Basel 3 banking regulations come into effect. However, it works, I still predict much higher gold and silver prices in the next six months to two years.
Patrick A. Heller was honored as the 2019 FUN Numismatic Ambassador. He is also the recipient of the 2018 Glenn Smedley Memorial Service Award from the American Numismatic Association, the 2017 Exemplary Service Award, the National Dealer Award of the Harry Forman Year 2012 and Presidential Award 2008. Over the years, he has also been honored by the Numismatic Literary Guild (including two in 2020), the Professional Numismatists Guild, the Industry Council for Tangible Assets and the Michigan State Numismatic Society. He is the communications manager for Liberty Coin Service in Lansing, Michigan, and writes Prospects for freedom, a monthly newsletter on rare coins and precious metals. Past newsletter issues can be viewed on www.libertycoinservice.com. Some of his radio commentaries titled “The Things You ‘Know’ That Just Aren’t, And The Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings at 1:20 p.m. WILS in Lansing (broadcast live and part of the audio archives posted on www.1320wils.com).