Basel III: Gold’s Status as Tier 1 Asset Restored + Bank of Japan Monetary Policy, Competitive QE
From YouTube:
Patricia Mohr, creator of Scotibank’s Commodity Price Index, talks Bank of Japan, Basel III, Eurozone and FOMC minutes, and what it all means for gold. Beginning with simple forecasts for gold into 2013, Mohr sees a rising US Dollar which puts pressure on gold, but nevertheless looks for gold prices to rise in January, with the focus/driving force being a weakening Euro and ongoing Eurozone worries. Another big development in the currency world was Bank of Japan’s monetary policy review and liquidity injections. Undertaking further quantitative easing, Bank of Japan hopes to prevent the Yen from rising against the US Dollar by moving towards easier monetary policy, thus preventing the Yen from appreciating. Another reason for Japan’s doing so is that as a large exporter, they don’t like to see an overly strong Yen. This is indicative of “competitive monetary easing” that we’re seeing elsewhere around the world, to keep currencies from appreciating against the US Dollar. Moving onto the latest FOMC/FED minutes, Mohr says they contain something she’s hasn’t seen throughout her entire career: the announcement that they plan to keep FED fund rates unchanged through 2015, regardless of economic improvement monetary policy will remain unchanged. Interest rates this low for this long a period of time is unprecedented and “extraordinary” according to Mohr, something likely bullish for gold. And perhaps an even more important development for gold come 2013 are Basel III regulations, which stipulate that come January 2013 gold will regain its full status as a financial asset. What this means is that banks will be able to hold gold as Tier 1 Capital, a “very interesting” development for gold according to Mohr, and definitely a positive.
