What Has Been Said About the Basel III Effects on Gold V. What is Really the Truth (Abbreviated)

Up to this point, the new Basel III effects on gold have been nothing to write home about. There really should be no surprise that all the excitement that led up to the 28 June Basel III law that many predicted would result in gold and silver prices strongly moving higher in June and July turned out to be false hope based on delusions. Instead, we received the usual bullion bank knockdown of gold and silver prices that normally occur into OpEx and FuturesEx a couple of weeks earlier in June and after these new Basel III laws went into effect, the predicted upward drafts in gold and silver prices that were supposed to manifest never did. So much for all that anticipation for nothing.

This article is also an offering to the bitcoin maximalists that always accuse me of “bashing” bitcoin when I provide legitimate, documented and credible critiques of bitcoin’s exposure to downside price manipulation that is never “bashing” as perceived by maximalists. The most popular accusation of bitcoin maximalists has always been that I bash bitcoin and continually raise up gold and silver, an accusation that only proves one thing – that none making this accusation have ever read a single one of my hundreds of articles about gold and silver in which I’ve discussed gold and silver’s vulnerability to downside price manipulation in the past fifteen years, and know nothing of multiple times I’ve accurately predicted deep pullbacks in the gold and silver prices based upon unbiased analytical evaluation, as I’ve also done with bitcoin.

The reason I informed my patrons on the skwealthacademy patreon platform, at the very start of June, to ignore all the white noise about a developing short squeeze in silver and gold that would manifest when Basel III regulations went into effect at the end of June was because there has been zero hard evidence over the past sixteen years that bankers ever even backed allocated precious metal accounts with 100% physical gold and silver. The allegations, published in dozens of online precious metal news sites, were that new Basel III regulations going into effect at the end of last month made a distinction in bank collateral between unallocated gold (zero credit) and allocated gold (credit as a zero risk asset) that would radically alter bank holdings of physical gold. I will expose why this interpretation was completely wrong, why terms used in that statement were inaccurate, and why this conclusion was not even logically supported by the content of Basel III regulations later in this article.

To begin, let’s discuss historical evidence that suggests that the world’s largest banks have always lied about their allocated precious metal accounts holding 100% physical gold and silver on behalf of their clients. Since this evidence is well documented, why the hell would any gold and silver analysts worth their weight in salt believe that the 28 June 2021 Basel III regulations would cause a mad scramble on the bankers to shift the amount of their unallocated gold accounts into allocated gold accounts, executed with real purchases of physical gold? Of course, were this to actually happen, then I would understand why analysts would believe that gold prices were about to rocket higher in June/ July or even by 1 January 2022. But since history provides no evidence of such a hypothetical scenario coming into play, even the belief among more rational analysts that Basel III regulations would take a longer time to play out and that, maybe by the end of this year, gold and silver prices would soar higher as a result, is heavily misguided.

Even if gold and silver prices continue to move higher from their respective current prices of around $1,800 and $26 an ounce for the rest of this year, and reach significantly higher prices by December 2021, the fact that Basel III regulations went into effect on 28 June 2021 would merely be a correlated event to higher gold and silver prices and not a causative one. Here’s why Basel III regulations are likely to have little to no real affect on gold and silver prices in a positive manner, not even by 1 January 2022.

The Evidence

Let’s begin by discussing historical evidence of bankers alleging to back allocated gold and silver accounts with 100% physical precious metals that that brought such claims into serious doubt. For example, in a previous article I published on this news site, I wrote of an incident 16 years ago in which all evidence pointed to Morgan Stanley bankers having lied to clients about the purchase of allocated physical silver:

“In 2005, [Morgan Stanley] clients entered into contracts with Morgan Stanley bankers to purchase physical silver, gold, platinum and palladium from them in which they could take physical delivery at any time and held the paper contracts as ‘proof’ of their physical precious metals ownership in vaults owned by Morgan Stanley.  However, when one client decided he wanted to take delivery of his physical silver purchases, Morgan Stanley bankers refused to deliver, and the client eventually filed a class action lawsuit in which Morgan Stanley paid out $4.4M in awards and damages, but returned no physical precious metals to any of their clients.”

Though Morgan Stanley bankers admitted no guilt, due to a cowardly US justice system that existed back then that did not require bankers to admit guilt to criminal acts but continually handed down a “get out of jail” free card to bankers in return for the deliverance of a small measly fine, Morgan Stanley bankers asserted that they had committed no wrongdoing even though they never produced the physical silver they claimed to have bought and returned no physical silver to any of their clients that signed legal contracts stipulating they owned physical precious metals. Instead, due to the justice system handing them a “get out of jail” free card, Morgan Stanley bankers opted to pay a fine that exceeded the spot prices of the metals they allegedly held.

Think of the extreme low level of intellect one would need to possess to actually believe the garbage narrative forwarded by Morgan Stanley bankers. If they actually owned the precious metals they were legally obligated to own, would they not simply deliver the precious metal weights to their clients instead of grandstanding in court in a massive charade, claiming they had fulfilled all their contractual duties while simultaneously refusing to deliver said requested precious metals to their clients? The only logical reason Morgan Stanley bankers would not simply fulfill their legal contractual obligations to deliver physical precious metals to their clients upon request was if they had actually purchased silver derivative contracts, charged their clients imaginary storage fees for imaginary storage of imaginary silver they never purchased, and like mafia bosses, manipulated the US justice system to avoid all criminal charges for a very criminal act. For those that don’t understand how silver futures contracts work, one might ask the reasonable question,

Well, why wouldn’t the bankers, to cover up their lies, merely close out their futures contracts to take delivery of physical silver they never held for their clients and then deliver the physical silver to their clients?  

Logic, the Missing Elixir of Many Financial Analysts, Provides the Answer

They likely opted not to do so for one of two reasons. Either (1) They had gotten away with bloody murder in committing endless series of criminal acts for so long that they didn’t actually believe they would lose the class action lawsuit and were advised by their lawyers to go to court because they would probably win; or (2) Morgan Stanley executives calculated, with the help of their lawyers, that the losses they would have to assume by paying a fine should they lose the class action lawsuit would amount to less then the losses assumed by closing out the silver futures contracts they held with physical delivery. Since silver prices had moved strongly higher at the time of the class action lawsuit from the time most of their clients had entered contracts to “buy” silver in allocated silver accounts, taking physical delivery of silver on any open futures contracts would have resulted in massive losses for Morgan Stanley. Therefore, from a monetary perspective, they concluded that their best course of action was to proceed with the class action lawsuit and pay the fine.

Secondly, in 2013, ABN Amro, the third largest bank in the Netherlands, also slithered their way out of allocated gold agreements with their clients and surprised their clients (in a bad way) by delivering a letter to them that stated they no longer could take physical delivery of their allocated gold, even though such behaviors were specified in their original contracts as allowable, and that they would only be able to close out their allocated physical gold accounts and receive the Euro equivalent spot price for gold at the time they gave notification of closure. In this instance,  I also wrote about this event when it happened more than eight years ago, and I concluded, as I did with the Morgan Stanley case, that ABN Amro bankers flat out lied to their clients that opened up allocated physical gold accounts with them.

For legal purposes, I have to state that my conclusion in this case, as was my conclusion of the Morgan Stanley case, is only my opinion. However, any logical person would arrive at the same conclusions as myself given the observed behavior of ABN Amro bankers that directly contradicted their claim of holding physical gold in their client allocated gold accounts. This case was even bigger than the aforementioned Morgan Stanley class action lawsuit, as this case affected nearly 2,000 ABN Amro clients. Unfortunately, since the 2008 global financial crisis, many judiciary systems have assumed a “protect the criminal bankers at all costs” stance and allow bankers to arbitrarily change the terms of legal contracts with no punitive consequences. Consequently, unlike the Morgan Stanley case in which bank clients sued the two-faced lying bankers and received punitive damages in excess of the spot price of their physical silver purchases, ABN Amro clients had no legal recourse to this dirty 2013 surprise notification but to simply dissolve their physical gold accounts by accepting renumeration in the form of the spot price of the “gold” held in their “allocated” accounts.

In addition to these two well publicized cases, there also have been a number of cases in recent years in which well known asset managers in Switzerland and Australia have relayed stories of their clients with allocated gold accounts held in large “reputable” Swiss banks and at the Australian Perth Mint that asked for physical delivery of prior purchased gold, but whose requests were denied and given the run around for many months. The interesting part of these cases is that I know that some of these anecdotal stories are true, at least in Australia, as I have verified with friends of mine who are Australian citizens the validity of these delivery delays that should take no longer than a few days if the Australian Perth Mint was actually vaulting gold for clients as they have claimed. Yet, go to Google and conduct an internet search for such cases and there is nothing returned in their search results for these cases that are ongoing. Again, just another reason why Google can never be trusted not to censor truth they do not want the masses to know.  

So the conclusion is easy to make in this case. With sixteen years of continual banker lies at all levels from large national banks to large international global banks, to State authorized official mints, why would any person of sound mind believe that the Basel III regulations of only giving credit as collateral to unencumbered precious metal accounts (if these were even true) change a single behavior of bankers when they almost assuredly never bought any physical gold or any physical silver to back allocated accounts for the past sixteen years? If bankers needed to increase the amounts of allocated gold in their possession to meet minimum levels of Tier 1 capital requirements in order to “pass” future stress tests, since they have been allowed to claim whatever they wanted in regard to gold on and off their balance sheets with zero accountability and zero verification of their claims, why would they ever buy physical gold in response to any newly introduced regulations? Why would they not just continue to purchase paper derivative gold and silver contracts and classify them as unencumbered physical gold and silver on their balance sheets as they have done for the last sixteen years?

And that, my friends, is why it is completely delusional to think that Basel III regulations will somehow  radically change banker behavior when it comes to physical and paper gold and silver in the future and that their “forced” radically altered behavior will cause gold and silver prices to spike in futures markets? I literally laughed out loud when I read some articles stating that Basel III regulations will shift global banker behavior into shunning paper gold for physical gold holdings on their balance sheets starting 28 June 2021, or at the latest, by 1 January 2022. I guarantee you Vladimir Putin has seen hundreds of times the amount of real gold in his lifetime than all the bigshot commercial bankers have ever seen in their bank’s allocated gold vaults combined. Furthermore, as I will expose soon, all of those predictive changes in banker behavior toward gold is pure propaganda anyway.

If You Want to Know the Truth, You Have to Go to the Source Material

However, to really get to the heart of the speculation of why so many analysts feel very strongly that Basel III regulations will drastically change the gold derivative markets and cause gold prices to soar (which by the way would also mean silver, platinum and palladium prices should also all soar in response to these regulatory changes), we always have to go to the source itself.

The rest of this 9,455-word article is reserved only for skwealthacademy patrons (benefactor level and higher) and premium Rokfin members. The full article will be released within the next 72-hours on those premium platforms and this abbreviated version is not even close to half of the full articles.

J. Kim

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