This past Wednesday, gold experienced a huge change in federal government regulation. The FDIC (Federal Deposit Insurance Corporation, USA), an independent agency of the Federal government created in order to guard against bank failures, clarified that gold bullion, among other specific holdings, would be assessed as a zero percent risk asset. This is the first time gold has been proposed as a 100% safe investment by the FDIC since its inception in 1933, and gold bugs aren’t the only ones hailing this decision as a decidedly bullish factor for gold. It is markedly true that gold is being recognized as a solid and reliable financial asset in a time of prolonged economic instability. Central governments worldwide, smart and savvy individual investors, and now independently organized overseers of banks are all making a move toward gold.
Governments And Banks Both On Board For Gold’s Return
Central banks have already been switching over to a precious metals inventory in the past few tumultuous years, many like the U.S. becoming net buyers rather than sellers of gold. And now, with this FDIC proposal, independent and commercial banks are following suit by removing risk associated with owning the metal. The FDIC’s proposed rule change will predominantly increase restrictions on how banks assess risks, and also help fortify assets designated as safe, zero risk investments. Gold bullion is one of six marked as zero risk assets, and there are six more assets deemed to be a 20% weighted risk asset.
What Does This Mean For Gold?
Once this proposal is passed into law, gold will only be valued at higher and higher rates. This precious metal has persisted as a symbol of wealth throughout all human history, and it’s now once again being valued as a real world asset with real value in the economic system. Gold bullion will hold more sway than Fannie Mae or Freddie Mac bonds. The real supply limits on physical gold bullion naturally increases the holding power of the metal, since this form of wealth can be tangibly accounted for, unlike un-backed paper money, bonds and credit. Gold is becoming a top tier-banking asset due to its solid, ever-increasing reliability in the face of proven economic failure.
Higher Prices Ahead
As gold gains power in the economic system, demand for the metal can only increase. Higher demand naturally leads to higher prices. As gold continues to be recognized as a real sign of wealth, clearly evidenced by governments’ investment in the metal and now banks’ acceptance of its security, the public sector will be shown even more acutely than before how gold is becoming a worthwhile, desirable and even perhaps necessary asset. In a time of immense economic insecurity, gold is emerging as a safe and tangible investment. There couldn’t be a better time to invest in gold: it is relatively cheap, governments are already storing it, and now banks are supporting gold bullion as a safe, no-risk resource. This FDIC rule change can only lead to a bullish road ahead for gold.