Basel III banking regulations have changed how banks treat physical gold. Banks can now count gold at full market value alongside cash and Treasury bonds when calculating their reserves. Most people are unaware of this change, but it matters for anyone who owns precious metals. This change eliminates the previous requirement that banks discount gold holdings by 50% when reporting reserves, which makes gold more attractive for banks to hold.
July 2025 marked the first time that regulators allowed banks to count physical gold at 100% of its value when calculating their reserves. Now it sits alongside cash and Treasury bonds as a top-tier asset.
What Is Basel III, and Why Does It Matter?
The Basel III banking regulation emerged from the 2008 financial crisis. Banking regulators decided that banks needed stronger capital requirements and better risk management to prevent another financial crisis like the one in 2008. Banking regulators decided that banks needed sufficient reserves to prevent collapse when markets became unstable again.
Physical gold now gets treated as a Tier-1 reserve asset. That puts it right next to cash and government bonds, which is a very significant change from how they used to have to value their gold. Banks used to have to mark down their gold by 50%, but now they can count every ounce at full value.
When banking regulators classify something as Tier-1, they consider it among the safest and most liquid assets banks can hold.
Gold’s Tier-1 Status: A Game-Changer for Investors
Central banks have been buying gold for years, but faced regulatory constraints. Before Basel III, banks were required to hold additional capital against gold positions and could only count gold at 50% of its value for reserve calculations.
Banks can now buy gold the same way they hold cash reserves. That’s completely new, and it matters because these institutions manage trillions of dollars. When the rules change, buying habits change too.
This change settles questions about the role of gold in modern finance. It’s difficult to argue that gold is outdated when international banking authorities treat it the same as cash and government bonds.
Why This Makes Gold a Better Portfolio Hedge
The timing works out well here. Government bonds have been under pressure from rising rates and concerns about inflation. Gold’s new status gives it credibility just when traditional safe assets are struggling.
Basel III removes the roadblocks that kept pension funds and insurance companies from buying gold. That’s fresh demand from institutions with deep pockets.
This helps with inflation protection, too. Bonds get crushed when prices rise, but gold has held its value during past inflationary periods. Basel III makes this hedge available to big institutions that couldn’t touch gold before.
Physical Gold: Still the Smartest Choice
Here’s something important that most people miss. Basel III specifically covers physical gold, not ETFs or futures contracts. The regulations apply to physical gold bars sitting in bank vaults.
That distinction matters. Paper gold has counterparty risk and liquidity issues that don’t exist with actual metal. When banks pick their Tier-1 assets, they want gold they can hold, not promises of delivery.
This backs up why buying physical gold makes sense over financial products that just track gold prices.
Tips for Buying Physical Gold Wisely
Getting started is simple when you know what to look for.
Buy standard bullion products. American Gold Eagles, Canadian Maple Leafs, and bars from recognized refiners trade closest to spot price. These are what institutions buy because they’re liquid and widely accepted.
Expect to pay 3-7% over spot for most coins and bars. Dealers charging significantly higher premiums than this may not be offering a competitive deal. Shop around and compare the prices charged by different companies.
Storage matters from day one. Small amounts fit in a home safe. Larger holdings need professional storage. Most people start small and add more as their collections grow.
Buy regularly instead of trying to guess when prices will move. Steady purchases smooth out the ups and downs over time.
Work with dealers who have been around. This business attracts operators who overcharge customers. Stick with companies that have track records and clear pricing.
Bottom Line
Basel III puts gold in the same category as cash and government bonds, which represents validation from the global banking system that gold belongs in serious portfolios.
The timing works well for anyone worried about inflation, geopolitical uncertainty, or traditional safe asset performance, and when bank regulators give gold the same treatment as cash, they’re signaling gold’s fundamental importance as a store of value and hedge against monetary instability.
This doesn’t guarantee gold prices will shoot higher, but it removes artificial barriers that kept institutional money on the sidelines and combined with everything else happening in markets right now, that could be a smart addition to your portfolio if you’re thinking about owning gold in 2025.
Call us today to discuss your precious metals strategy, and our non-commission brokers can help you figure out what these changes mean for your specific situation.
This is a two-part series about the impact of Basel III.
Click here to read How Basel III Changes the Game for Institutional Investors
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