Gold’s Tier 1 Rise: The Most Underrated Shift in Modern Finance

By:  

Brian Conneely

Brian Conneely

Precious Metals Advisor

Brian Conneely is a Precious Metals Advisor at Scottsdale Bullion & Coin. He's worked in the precious metals market since 2009, trading commodities and futures before moving into physical gold & silver investing.

See full bio

 & 

Todd Graf

Todd Graf

Precious Metals Advisor

Todd Graf is a seasoned Precious Metals Advisor at Scottsdale Bullion & Coin. He has a decade-long career in finance, previously at Morgan Stanley and Vanguard. He is Series 7 licensed and has extensive experience in traditional and defensive assets, providing clients with solid investment strategies.

See full bio

The Gold Spot

May 9, 2025

Published

The Gold Spot

Gold’s record-shattering rally has been largely attributed to spiking safe-haven demand due to economic and geopolitical volatility. This disruptive shift in market dynamics plays a crucial role in the yellow metal’s rally, but doesn’t reveal the whole picture.

While retail investors are focused on classic narratives of gold as an inflation hedge or shield against uncertainty, central banks and major financial institutions are looking at the metal’s reintegration into the global banking sector.

In this week’s The Gold Spot, Scottsdale Bullion & Coin Precious Metals Advisors Todd Graf and Brian Conneely discuss gold’s rise to Tier 1 collateral and what it could mean for future prices.

What is Tier 1 Collateral?

Recently, gold has joined the exclusive club of Tier 1 collateral assets. Only the most liquid, highly stable, and widely recognized instruments can maintain this valued position. Under this classification, central banks and financial institutions can treat gold as cash or government bonds when meeting liquidity, capital, and allocation requirements.

More specifically, gold’s coveted status as Tier 1 collateral means:

• It carries zero risk weighting, allowing banks to hold physical bullion without allocating more to higher-tier capital to offset potential losses.
• Financial entities can borrow against gold when securing loans and accessing liquidity from other lending institutions.
• The yellow metal is a more appealing asset to maintain on balance sheets by increasing capital positions without requiring additional compliance.
• During periods of volatility, the banking system can use gold to raise capital and meet liquidity requirements.

Overall, gold’s shining ascent to Tier 1 collateral is an official stamp of approval from the global banking community, elevating the metal from a speculative commodity to a core financial asset, trusted for balance sheet strength, liquidity operations, and systemic risk management.

Gold’s Road to Tier 1 Status

Since abandoning the gold standard, the yellow metal has remained a highly valued and sought-after commodity. Yet, it failed to receive official adoption into the banking sector until recently.

• Pre-2010s: Gold was treated as a commodity, subject to capital requirements, and not recognized by banks as high-quality collateral.
• 2013–2017: Basel III reforms introduced stricter liquidity rules; gold advocates such as the World Gold Council began pushing for its inclusion as a top-tier asset.
• June 2021: The EU and Switzerland implemented Basel III’s NSFR, recognizing allocated physical gold as a 0% risk-weighted, Tier 1 asset.
• January 2022: Full global rollout of Basel III made physical, unencumbered gold Tier 1 collateral in major banking systems.

Now, gold is becoming the cornerstone of a new financial order amid a great economic reshuffling.

Are Gold Prices Too High? (Hint: It’s Psychological)

As mentioned before, most retail investors are still operating under gold narratives from a few decades ago. It’s not that the yellow metal no longer serves these functions. Rather, gold’s role is expanding dramatically as part of the worldwide banking system. This institutional change ensures long-term demand from central banks, bullion banks, sovereign wealth funds, and financial institutions.

Founder’s Take

“Bullion prices have surged dramatically, capturing widespread attention. While coin premiums are poised to rise, these price movements stir psychological reactions among the general public, unlike the calculated responses of central banks and major hedge funds. The notion that gold is “too expensive” is driven by emotion, not evidence. As global markets increasingly seek the stability of gold, time will reaffirm its enduring value, spurring renewed public demand for coins. This will likely push premiums to the elevated spreads historically observed, as available coins dwindle.”

Eric Sepanek

SBC Founder

Eric makes two key observations:

1. Investors who understand gold’s full significance and value as Tier 1 collateral expect prices to move much higher. Those chasing highs or stuck in older paradigms mistakenly see relatively high prices as signs of an impending correction.
2. Additionally, Eric points out how gold coins have yet to experience the same ripe demand as gold bars. This means dealer premiums–the add-on costs for transporting, securing, and storing these assets–are much lower…for now.

“We still have a lot of buying opportunities in the coin world.”

Todd Graf

Precious Metals Advisor

The Path to $4,000/oz and Beyond

Prior gold rushes were defined by the metal’s structural role at the time. Now, with official adoption in the global economy, we’re entering a Gold Rush 2.0. To understand how we got here and how prices could surge to $4,000 and beyond, check out the video below, produced by the financial media. We think it does an excellent job charting gold’s rise.