The Gold Story Everyone
Got Wrong

“Gold is money. And it’s the kind of money you want to own when the world is on fire.”

— Frank Holmes

July 24, 2025 — Something interesting happened — or rather, didn’t — in the gold world recently. And, true to form, the mainstream media completely botched the story.

Strangely enough, it wasn’t even bad news.

Now, gold may need some good press every now and then — but what it definitely doesn’t need are made-up narratives and fake sensationalism.

I don’t usually do takedowns, but this kind of clickbait nonsense just gets under my skin.

Anyway, this one’s from Forbes:

As of July 1, 2025, gold will officially be classified as a Tier 1, high-quality liquid asset (HQLA) under the Basel III banking regulations. That means U.S. banks can count physical gold, at 100% of its market value, toward their core capital reserves. No longer will it be marked down by 50% as a “Tier 3” asset, as it was under the old rules.

This is a huge shift in how regulators perceive gold, and it’s a long-overdue recognition of what many of us have known for decades: Gold is money. And it’s the kind of money you want to own when the world is on fire.

The story’s been parroted by Kitco, USFunds, Interactive Brokers’ Trader Insights, a bunch of forums, and dozens of other outlets. Even folks in our Phyle community have been asking about it.

Unfortunately, it’s just not true. And since it’s sparked a wave of confusion and fake headlines, I think it’s worth taking apart.

The HQLA Fiction

Let’s start with the HQLA claim, which is the most egregious part of this fairy tale.

HQLA — or High Quality Liquid Asset — is a specific regulatory designation under Basel III (more on that below). It refers to assets banks must hold to survive a 30-day liquidity crisis. Think cash, U.S. Treasuries, or top-rated government bonds.

If gold were granted HQLA status, banks could count it toward their liquidity coverage ratios — essentially making it a go-to asset during financial stress. The demand implications would be staggering.

The problem is, gold hasn’t been reclassified as an HQLA. Not now. Not on July 1. Not ever — at least not yet.

To qualify as HQLA, an asset needs to meet a long list of requirements: low risk, clear and consistent valuation, low correlation with risk assets, deep and active markets, low volatility, and so on.

Would gold qualify? Probably — especially if you give more weight to its recent performance. But it hasn’t been formally added (and let’s just say, some big banks haven’t exactly been campaigning for a reclassification).

That said, the London Bullion Market Association (LBMA) and the World Gold Council (WGC) are pushing hard for gold’s inclusion. They argue gold is “HQLA in all but name.” Here’s what the LBMA recently said:

While gold is not currently classified as an HQLA under Basel III and there are no announcements of prospective changes, there’s also overwhelming evidence that gold does behave like one. Whenever the rules are revised, we believe regulatory authorities should revisit their initial decision and reconsider gold’s standing.

They also said they analyzed gold’s market behavior over the past six months and found it met key HQLA criteria — most notably, a marked improvement in volatility, long seen as gold’s Achilles’ heel.

The point is, gold might get HQLA status down the line — but we’re definitely not there yet.

Basel III and Gold

What about the Tier 1 designation? Is that part true?

Yes and no. It’s a bit nuanced — bear with me.

Yes, gold is treated as a Tier 1 asset — meaning it gets the safest possible risk weighting (0%) alongside cash and government securities. But this isn’t news from July 2025 — it’s been the case for several years now.

To understand what’s really going on, you need to know about the Bank for International Settlements (BIS).

The BIS is the “central bank of central banks”—a Swiss-based institution that most people have never heard of but wields enormous influence. Its 63 members include every major central bank: the Fed, ECB, People’s Bank of China, Bank of Japan, and 59 others.

The BIS facilitates transactions between central banks and likes to present itself as a guardian of systemic stability. In fact, it was actually born out of crisis — established in 1930, just after the Crash of ’29.

That’s where the Basel Accords come in — the BIS’s guidelines for how banks around the world should manage capital, risk, and liquidity.

Note: These Basel rules apply to commercial banks—not central banks. But central banks are usually the ones enforcing them.

To date, it has issued three Basel Accords:

• Basel I (1988) set basic capital requirements and grouped bank assets by risk.
• Basel II (2004) built on that — added more rules, and required more disclosure.
• Basel III (2009) came after the 2008 crisis. It made banks hold more capital and set stricter rules on leverage and reserves.

The idea — at least officially — was to prevent the next global meltdown by nudging banks toward holding safer assets.

And since 2017, that also includes gold.

That’s when the BIS updated Basel III to include new rules specific to physical allocated gold (more on that below).

For the first time, gold was treated as a Tier 1 asset, right alongside cash and sovereign bonds.

Admittedly, banks didn’t rush to adjust. Europe rolled it out by mid-2021. The UK and U.S. followed in 2022 — though a lot of U.S. banks dragged their feet until 2023 or even 2024.

But again — none of that happened earlier this month.

Bottom Line

So the “huge shift” in how regulators perceive gold — the one Forbes just discovered — has actually been nearly a decade in the making.

But yes, it was huge. No argument there.

For starters, Basel III made it far more attractive for banks and other financial institutions to hold physical gold.

That’s because the new rulesgave gold formal recognition in the international financial system. Before that, gold — in any form — was treated as a risky asset for regulatory purposes. Holding it came with capital penalties. Now, under the right conditions, it’s treated like cash or Treasuries.

Make no mistake — this is a monumental change.

But it wasn’t the only one.

Basel III also drew a clear line between allocated and unallocated gold.

It might sound technical, but the difference is huge. Here’s why.

With allocated gold, you’re the direct owner of a specific physical bar or coin. There are no other claims on it — it’s yours, plain and simple.

Unallocated gold is a different story. You don’t own the metal itself. It stays on the bank’s books, and you effectively become a creditor. The institution may not even hold enough gold to back all its unallocated positions, meaning there could be multiple claims on the same metal.

Now, banks love unallocated gold. It’s easier to move, trade, and doesn’t take up vault space.

But under Basel III, only allocated gold gets the 0% risk weighting. Plus, banks holding unallocated gold have to hold extra reserves against it — specifically, they’re required to back 85% of that exposure with other Tier 1 assets.

In short, Basel III has made it a lot harder for banks to play accounting games — to claim they own gold without actually holding any (or less than they’re supposed to).

The (almost predictable) result? It’s pushed banks toward real, physical bullion. And that shift will continue to drive gold’s price toward $4,000 and beyond.

The bottom line is, we don’t need fake narratives or headline hype to make gold look good — the real story is more than enough.

Strap in, folks.

Regards,

Lau Vegys
Doug Casey’s Crisis Investing and Grey Swan Investment Fraternity

P.S. from Addison: Gold continues to see strong buying from central banks – but keep an eye on silver.

The metal isn’t as important as a bank reserve – but it’s a crucial mix of hard money and key industrial purposes. Recently the metal got up to $39 per ounce, still off its 2011 highs of $48 per ounce, and all-time high of $50 in 1980.

In fact, silver is the only metal that hasn’t made a new all-time high in recent years. As Shad Marquitz noted in this week’s Grey Swan Live!, it’s got some of the strongest potential to stage a catch-up rally.

So if you think gold is too expensive to own, silver is still cheap. In fact, to make new all-time inflation-adjusted highs, it should probably trade closer to $250 per ounce, not $50.

Your thoughts? Please send them here: addison@greyswanfraternity.com