Is Gold About to Have Its Status Upgraded?

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#1 Tue, Jun 21, 2011 - 4:05am
Koh Samui
Joined: Jun 15, 2011

Is Gold About to Have Its Status Upgraded?

Interesting report ..

'After years of being undervalued, a sentiment is building to have gold upgraded to Tier 1 status. This would level the investment playing field for the yellow metal and encourage banks to increase gold’s share of their reserves.

There’s been no official word from the BCBS yet on an official upgrade of gold to Tier 1 status but some think it could come as soon as the third quarter of 2011. If an upgrade were to take place, it would likely have a profound impact on gold and gold equities. We anticipate that central banks around the world would add (some of them significantly) to their gold positions, which would further tighten gold supply and increase gold consumption.

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Edited by: churchill on Nov 8, 2014 - 5:31am
Tue, Jun 21, 2011 - 9:24am
Joined: Jun 14, 2011


Tier 1 is a no brainer!

The BCBS has three tiers to grade the quality of capital held by financial institutions:

Tier 1 – A high quality, liquid asset that must have exchange-related characteristics. Criteria include low credit and market risk, certainty of value, low correlation with risky assets, and listing on a developed and recognized exchange. There are also market-related criteria to determine whether an asset is a part of an active market, there are adequate market makers and what happens to the asset’s value when there’s a flight to quality.
Tier 2 – These assets are considered “secondary bank capital.” These assets were never clearly defined and contain a range of assets with varying degrees of liquidity. Many of these assets could quickly lose value if liquidity dries up. Investopedia says this includes undisclosed reserves, general loss reserves and subordinated term debt—those that rate below other securities and are second in line when the debt gets paid out.
Tier 3 – Tier 3 assets are similar to Tier 2, except that securities such as subordinated debt are in greater number. Investopedia says assets must be unsecured, limited to 250 percent of a bank’s Tier 1 capital, subordinated and have a minimum maturity of two years.

Thanks CHill for this.