What this report (from perhaps the Internet’s best blogger, the anonymous “washingtonsblog”) documents is that the world’s major central banks have recently issued proposed regulations adding gold as a currency for when the capital requirements of individual banks are being calculated.
This momentous news means that within just a few months, almost surely before 2013, when the new rules will become fully approved and in force, gold will officially be a currency again, at its new market-value, and no mere commodity (such as copper or even silver or platinum are — even silver and platinum are unmentioned in these new rules as being natural currencies, only gold is mentioned, which is basically what the new rules are saying about gold: that it’s a “zero-risk asset” or a “Tier 1 Asset”) the cost of gold will then soar, just as a bond normally would soar if a private corporation’s bonds are upgraded by Moody’s or S&P, but even more so.
Notice, for example, that, according to the new rules in the U.S., a given bond’s rating from the credit-rating agencies such as Moody’s and S&P will no longer even be considered when calculating a given bank’s reserve-requirements. This means that now, officially, the credit-rating agencies themselves are effectively junk — too corrupt to count for anything, in the eyes of the FDIC etc. But gold will count as a “zero risk” asset, with no “credit rating” at all to worry about.
This information has not yet been factored into gold prices, much less into the value of gold-mining stocks, which are temporarily severely depressed due to the relative strength of the dollar vis-a-vis the euro. (Gold is priced in dollars, as the international reserve currency.)
Regarding gold versus gold-mining shares, as different ways to invest in gold: gold-mining shares are valued on the long-term expected future price of gold, plus on the given mining company’s management and other distinctive features; but physical gold is valued only on the current price of gold. This is why gold-mining shares are in a deep slump: the dollar’s temporary strength against the euro is pushing down the gold-price and therefore depressing the apparent future value of gold-in-the-ground.
Once the new rules go into effect, the value of gold-in-the-ground will jerk up, with explosive implications for gold mining shares (whose valuations are typically based upon around a one-third discount of the current gold-price). Gold-in-the-ground will thus rise even more sharply than bullion, because suddenly, the doubts about whether gold is now priced in “bubble” territory will be gone; everyone will recognise that gold has been undervalued as a mere “commodity” (like silver and platinum will continue to remain).
Though this is not insider information, it is clearly valuable information for anyone who wonders about the value of gold, and of gold-mining companies, during the next few months.
Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity
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