Federal Reserve Mulling New Gold Regulation; ‘May be biggest event in gold market since US dropped gold standard’

via: StratRisks
June 29, 2012

US authorities have recently called for comment on a rule change that may impact the gold market.

The US Treasury, Federal Reserve and the FDIC have jointly sought comment on changing some capital adequacy rules for when an institution holds gold in its own vaults or in another’s vaults.

According to the draft documents released, when gold is currently held as an asset, it is risk weighted at 15% – that is, a 15% haircut is taken on its current value for capital adequacy calculations. (See page 86 of the attached Federal Reserve document.)

However, in this same document, they are proposing that there be no (zero) discount.

That would then put gold on the same basis as cash.

217.131 Mechanics for Calculating Total Wholesale and Retail Risk-Weighted Assets.

(i) A bank holding company or savings and loan holding company may assign a riskweighted asset amount of zero to cash owned and held in all offices of subsidiary depository institutions or in transit; and for gold bullion held in a subsidiary depository institution’s own vaults, or held in another depository institution’s vaults on an allocated basis, to the extent the gold bullion assets are offset by gold bullion liabilities.

This seems an adventurous move. Over the past five years, the US$ value of gold has moved more than +/-50% from its average over that time, and is currently sitting -20% below its high in that same period. In cash terms, there certainly has been market price risk.

Continue Reading At: StratRisks.com

, , , , , , , , , , , ,

  1. Leave a comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: