26 June 2012

BIS says gold is a currency, not a commodity

Page 179

“Gold is to be dealt with as a foreign exchange position rather than a commodity because its volatility is more in line with foreign currencies and banks manage it in a similar manner to foreign currencies.”

Page 182

“718(xLiii). This section establishes a minimum capital standard to cover the risk of holding or taking positions in commodities, including precious metals, but excluding gold (which is treated as a foreign currency according to the methodology set out in paragraphs 718(xxx) to 718(xLii) above). ... The price risk in commodities is often more complex and volatile than that associated with currencies [ie gold] and interest rates. Commodity markets may also be less liquid than those for interest rates and currencies and, as a result, changes in supply and demand can have a more dramatic effect on price and volatility.”

Who's to argue with the eggheads at the BIS? Well, a lot of financial market people who hate gold always call it a commodity, which hides its special nature.

Any commodity with around 60 years of above ground inventory would have a price close to zero. The fact that gold has a price tells you it is not a commodity.


  1. Recent posts by well known PM bloggers, show an increasingly vitriolic pattern of thought in my view.

    Martin A. Armstrong was villified by a blogger employed by a precious metals dealer for what was claimed as a bias against gold and having a pernicious influence on possible 'adherents' as though this(PM's) were a cause!

    'Smart money', high or low,will always go for the intrinsic worth,store of value,usefullness within the local culture,etc.

    The most recent point I particularly agreed with was simply this:

    Established fiat systems will never go back to a universal gold standard while they can control every transaction digitally & collect every tax deemed due.

    Those who believe otherwise and wait for cross border capital controls,will finally understand that not only the BIS,but all CB's know that gold is & always has been 'MONEY'.

    Good travelling!

  2. What else would a international clearing bank settle balances for? Gold sounds about right.

  3. It is quite true as the Gold is more volatile as compared to the commodities and similar to currencies.