There’s ongoing chatter about a great gold revaluation. People reference Treasury Secretary Bessent’s remarks about how the Federal Government should “monetize the asset side of the U.S. balance sheet.”
One popular theory suggests that means the Treasury would revalue gold to the market price (or even higher) instead of the current valuation of $42/ounce.
Revaluation would immediately change the Federal balance sheet for the better, and could even completely wipe out the outstanding $34 trillion national debt (depending on how high the revaluation goes.)
But if you’ve been paying attention, gold has already been “revalued” – recently climbing to a record $3,500/oz high.
Part of that ongoing higher revaluation comes from a little-known international banking regulation known as Basel III.
If you’ve heard of Basel III, you probably also heard that it centered gold as a Tier 1 asset – meaning it’s a stable, safe asset that can backstop lending ratios, alongside cash and specific sovereign bonds.
But allocated, physical gold was always a tier 1 asset…
Basel III does place gold as a central asset for international banking purposes – because it clarifies requirements and cements gold as one of the few HIgh Quality Liquid Assets (HQLA) allowed to backstop banking operations.
In practice, Basel III places stricter limits on capital requirements and gets rid of so-called Tier 3 assets.
Specifically, Basel III introduced a new Liquid Coverage Ratio rule – which requires banks to hold HQLA equal to at least the net cash outflows over 30 days of operations.
Gold is one of the few assets that meets the standard to be a HQLA – but only if it’s held in allocated form. Basel III was being planned shortly after the Great Financial Crisis, starting in 2010. It was starting to be implemented in 2017.
These rules have been slowly ramping up over the past 8 years, with increasingly strict benchmarks and are scheduled to be completely rolled out this July.
Since Basel III’s rollout, gold prices have more than doubled.
At the same time, Central Banks and other global financial institutions have been gobbling up increasing amounts of gold the entire time:
Gold is not just Tier 1, High Quality Liquid Asset, it’s one that has outperformed every other Tier 1 asset (which includes most currencies and sovereign bonds) – AND the S&P 500 over the past 20 years:
Will President Trump revalue gold to $3,000 oz or $10,000 oz as some people suggest?
We can’t say. No one knows. But we can notice that gold has been quietly and slowly centered as a major asset on every financial institution’s balance sheet over the past decade.
The revaluation is ongoing. With every major currency being devalued by central banks, gold stands alone as a bulwark against major losses for the world’s banking system.
And now, even Warren Buffett is warning investors about the devaluation of currencies. Take a look at what I’m calling the Buffett Indicator for gold…
To your wealth,
Garrett Goggin, CFA, CMT
Chief Analyst and Founder, Golden Portfolio
History Says Gold Wins When This
Signal Flashes — and It’s Flashing Now
Every time the Buffett Indicator has hit extreme levels, stocks have crashed — and gold has dominated the decade that followed. Today, the Buffett Indicator is at its highest reading in history… and Buffett himself is sitting on an unprecedented $325 billion cash pile. Sources say he’s preparing to deploy it — not into stocks, but into gold. I have uncovered which gold company could be his next big move.