Basel III: The Golden Renaissance for Investors
For decades, many seasoned investors have argued that gold is far more than just a glittering relic—it’s a strategic asset worthy of a place in modern portfolios. Now, with Basel III regulations set to change the game, it seems central banks and the U.S. banking system are finally catching on.
As of July 1, 2025, gold will officially be classified as a Tier 1 high-quality liquid asset (HQLA). This pivotal shift means U.S. banks can now recognize physical gold at 100% of its market value in their core capital reserves. Gone are the days when gold was marked down by 50% under the old “Tier 3” classification.
Why This Matters: Gold Reclaims Its Status as Money
This transformation in regulatory perception signifies a monumental shift: gold is indisputably money once again. In an age where financial systems teeter on the brink of instability, gold stands out as a stable asset amid chaos. It’s exactly the kind of currency you want tucked away when the world feels like it’s unraveling.
Central Banks: The Guardians of Gold
It’s not merely speculation—central banks have been investing heavily in gold for over a decade. According to the World Gold Council (WGC), central banks added an astonishing 244 metric tons of gold to their reserves in the first quarter of this year, representing a 24% increase over the five-year quarterly average.
This trend isn’t just a flash in the pan; it’s a sustained movement that gained momentum post the 2008 financial crisis. Following Basel III’s reclassification in 2019, 30% of central banks indicated plans to boost their gold holdings within the next year—the highest level recorded in their surveys.
Why Are Central Banks Buying Gold?
Simple: they want to safeguard against currency debasement, geopolitical instabilities, and ever-increasing debt. As fiat currencies are printed at alarming rates, gold remains one of the few truly finite and unprintable stores of value. If the world’s leading banks are embracing gold, doesn’t it make sense for retail investors to follow suit?
The Retail Reawakening: A New Era for Investors
Fortunately, the answer is a resounding yes! Recent polling by Gallup reveals that nearly 25% of U.S. adults now consider gold the best long-term investment—a significant rise from last year and well above the 16% who currently prefer stocks.
This paradigm shift is noteworthy. For the first time in over ten years, Americans are placing gold above equities, driven by growing skepticism about stock market stability. Investors are pivoting back to what history has shown works during uncertain times.
Projections for Gold Prices
In previous years, I’ve made bold predictions. Back in 2020, I stated on CNBC that gold could reach $4,000 per ounce amidst increasing monetary loosening. Fast forward to today, and with increasing demand from central banks and ongoing geopolitical tensions, I believe gold could soar to $6,000 over the medium to long term.
The Curious Case of Gold Miners: Opportunities and Challenges
Here’s where it gets intriguing: despite soaring gold prices, gold mining stocks have been facing sustained outflows. The VanEck Vectors Gold Miners ETF (GDX), which tracks leading gold producers, has experienced negative capital flows for months. Despite rising gold prices, investors are pulling billions out of mining equities.
This disconnect indicates underlying concerns about the operational health of mining companies, which face myriad challenges such as cost inflation, labor shortages, and geopolitical risks. On the other hand, quality mining stocks offer significant leverage during rising gold prices, although institutional support tends to lag.
Meanwhile, interest in physically backed gold ETFs and streaming/royalty companies has grown, offering a lower-risk avenue for exposure to gold. Yet, let’s not overlook that miners are essential—they’re the ones physically extracting gold. As margins improve, they could yield significant gains.
Embrace the New Era: Be Your Own Bank
Basel III isn’t just a regulatory overhaul; it’s a validation of gold’s status as a monetary asset and a hedge against uncertainty. If the world’s most influential financial institutions are ramping up gold exposure, what’s stopping individual investors from doing the same?
For those unsure where to start, I recommend a balanced approach: 10% allocation towards gold, divided as 5% in physical gold (think bars, coins, jewelry) and 5% in high-quality gold mining stocks, mutual funds, and ETFs. Regular rebalancing is key to maintaining this strategy.
The stage is set. The golden opportunity awaits. Will you seize it?
(By Frank Holmes, CEO of U.S. Global Investors)
Useful Resources:
- Explore World Gold Council for comprehensive data on gold trends.
- Check out Gallup for insights on investor sentiment.
Engage with gold today—it’s not just an asset; it’s your financial lifeline.
