May 2021

graphic image of gold and silver stored in vault
Will Basel 3 boost gold and silver prices?

Coming changes could have an ‘enormous impact on precious metals markets

by Patrick Heller
Guest opinion reprinted with the kind permission of Numismatic News

“Right now, the COMEX currently has about $24 billion in short sales of gold futures contracts and another $1.6 billion in short sales of silver futures. There will almost certainly be pressures for short sellers to cover these COMEX contracts as continental European banks scramble to cover their short positions. However this eventually turns out, the ultimate result is almost certain that gold and silver prices will climb far higher, perhaps multiples of current levels, within the next six months to two years.”

Editor’s note: Several clients have contacted us with questions on the new Basel 3 accords implementation. This analysis from Patrick Heller, published originally at Numismatic News, is a compelling and very readable interpretation of Basel 3’s potential impact on the precious metals market – in fact, the most clearly written we have seen thus far on this complicated subject matter. It is difficult to know if the Basel Committee on Banking Supervision will implement the accord, particularly when one considers, as Heller points out, the negative impact it is likely to have on some large and influential international financial institutions. At the same time, one would think that by now, its net effects on the banking industry would be well understood and factored into the equation. We are still a month away from implementation, we caution, and anything could happen. Heller, as you are about to read, believes that its implementation would have a significant impact on gold and silver prices. We recall the signing of the Central Bank Agreement in 1999 and the subsequent impact it had on the market. Many analysts credit the signing of that agreement, which limited central banks’ sales and leasing of gold, with laying the groundwork for its secular bull market beginning a few years later. Whether or not Basel 3 will have the same impact remains to be seen, but the implications, as Heller describes them, are intriguing.

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