Basel III is the quiet rule change transforming the gold market

It's happening in real time, right now. Here's what Basel III means for investors, and why the breakout in the price of gold might only be the beginning.

Last week, gold hit multiple new record highs. On Monday, it exceeded $3,400 an ounce for the first time ever. Overnight, before publishing this article, gold touched on $3,500 and then fell slightly to $3,450.

The trajectory is unmistakable thanks to an international agreement called Basel III. Unless you’re paying attention, you might not have heard of this ultra-important rule change in international finance taking effect this summer; it has the potential to permanently alter how gold is treated in the US banking system — meaning this bull run may be far from over.

Basel III is a global banking reform designed to prevent another 2008-style collapse. Think of it as a financial safety checklist: banks must hold more “emergency savings,” avoid excessive risk, and stay liquid enough to survive 30 days of chaos.

Although you’ll never hear about Basel III from Jim Cramer or other talking heads on financial networks, Basel III is the reason the world’s biggest financial institutions are already preparing — buying gold in record amounts. It is, hands down, one of the key drivers behind gold’s recent breakout. And, if we were conspiracy-minded, it’s very likely part of the reason the US government has been talking about auditing the gold in Fort Knox and the President recently announced: “He who has the gold, makes the rules.”

(We fear that might just be bravado, as we await the results of the audit. But that’s another story.)

Starting July 1, gold will be upgraded from a “Tier 3” to a “Tier 1” asset — putting it on par with cash and US Treasuries. Right now, banks are required to discount the value of gold by 50% on their balance sheets. Under the new rule, it will be treated as a zero-risk asset and valued at 100% of its market price.

That means banks will no longer need to hold extra capital to back their gold holdings — making it far more attractive as a reserve asset.

So, how does this affect gold prices in 2025? Since Basel III says banks can use gold to meet their safety requirements, banks are buying it up in droves and this demand is pushing gold prices higher, as banks compete with investors who also want gold as a safe haven during uncertain times.

At the same time, we’re watching the slow, but undeniable death of US Treasuries and the move away from using the US dollar to settle international transactions. In other words, the days of the dominance of US financial instruments are quickly waning.

On top of this, since the supply of gold is relatively fixed, increased demand from banks and investors alike continues to drive prices higher.

As Basel III cements gold’s role as a trusted, stable asset, more institutions and individuals are rushing in — creating a feedback loop that keeps prices elevated. We’re already seeing the effects. While the S&P 500 stumbles under the weight of inflation, trade tensions, and geopolitical risk, the demand for gold is surging. It’s outperforming nearly every other asset class in 2025.

And with the Basel III rule change now just weeks away, the floodgates could soon open wider.

Make no mistake: gold’s breakout isn’t over. This is the middle of the move — not the end. As more institutions pile in, the final leg of this bull market could be the most explosive yet.

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