Issue link: http://resourceworld.uberflip.com/i/102869
grow again, and also isolate the crisis from other European nations." While at a nascent stage, these goldbacked Eurozone bond discussions reaffirm gold's credentials as a unique and highly compelling reserve asset. Another structural financial reform also bodes well for the price of gold. In response to the financial crisis of 2008, new Basel III capital and liquidity standards being implemented by the international Basel Committee for Bank Supervision propose many new capital, leverage and liquidity standards to strengthen the regulation, supervision and risk management of the banking sector. The capital standards and new capital buffers will require banks to hold more capital, and higher quality capital, than under current Basel II rules. On June 18, 2012, the Federal Reserve and FDIC sent a letter to banks that proposes US regulatory capital rules follow the prin- NOVEMBER 2012 ciples outlined in Basel III. The Basel III blockbuster for future gold demand is this: for the first time, gold bullion would have a 100% weighting, and be considered a risk free, Tier 1 asset for commercial banks. Currently, gold has a 50% weighting, and is considered a Tier 3 asset. At the same time, the new Basel III rules propose to increase the amount of capital banks must set aside to maintain capital adequacy – a potential double win for the price of gold. Profoundly, the proposed Basel III rules return gold to its historic role in the global monetary system, a worldwide signal that gold is a wealthpreserving asset and store of value. While these sound money policies are awaiting implementation, the desperationinspired fiat money policies remain in effect, creating cost-based inflation for the mining industry – another driver for gold price appreciation. There is a direct corre- lation between inflation and societal unrest as witnessed recently in South Africa, where 75,000 miners went on strike. According to Bloomberg News, production at all of AngloGold Ashanti's South African mines was halted in September; two Gold Fields mines were suspended earlier because of unauthorized strikes; and workers have been absent from Harmony Gold's Kusasalethu Mine since at least October 3. At the time of writing, more than 40% of Africa's gold output is idled while, in order to avoid more wildcat strikes, AngloGold, Gold Fields and Harmony Gold, Africa's three largest gold producers, offered to raise the wages of the lowest-paid workers by reorganizing job categories. As entire societies in various stages of inflation-induced economic turmoil begin to strike or, in some cases, fight against the daily ravages of currency debase- www.resourceworld.com 13