On June 18 the Federal Deposit Insurance Corp. proposed rule changes to categorize gold as a Zero Percent Risk-Weighted, Tier 1 Asset.
This is significantly bullish for gold in the long term as this potential systemic change could drive gold demand and gold prices much higher.
In light of the global financial downturn, cash and bonds have begun to lose their luster as global financial regulators have begun to recognize the implied risks behind paper assets.
In a world characterized by central bank printing binges and rampant government spending, banking regulators are quietly being forced to recognize one of the only remaining counter-party risk free assets: Gold.
While cash, credit, and bonds can be produced at almost infinite rates, there are real supply limits to physical gold. Central banks know this fact and the world's central banks are now net buyers of gold.
Today it appears, with this latest proposed rule change from the FDIC, commercial and private banks may soon be following into the soundness and stability which only gold can provide.
Thus, as an individual investor, would you rather own a zero percent risk-weighted asset with limits to its supply? Or would you rather hold a bundle of cash, credit, and bonds whose supplies are beyond your control?
Massive currency printing and bond issuances to finance growing debt levels are ahead. The continued decrease in the value of paper assets over the longterm appear all but inevitable. As the global financial system begins to shift toward real money, the escalating gold bull market's rise should only quicken.
Why not front run this trend?
Why not position you and your loved ones, on the correct side of the coming wealth transfer?