The U.S. Treasury’s Biggest Nightmare: Gold Is Money Again

How Sweeping Changes To Global Banking Regulations Will Vastly Increase Demand For Physical Gold

This is Porter’s Daily Journal, a free e-letter from Porter & Co. that provides unfiltered insights on markets, the economy, and life to help readers become better investors. It includes weekday editions and two weekend editions… and is free to all subscribers.

Table of Contents

• How Sweeping Changes To Global Banking Regulations …

• The Next Enron? Meet AI’s Ticking Time Bomb

• Three Things To Know Before We Go…

• And One More Thing… Poll Results

• Mailbag

No one had ever seen anything like it. 

Early this year, planes full of gold bars were landing nearly every day at New York’s Kennedy Airport and nearby Newark Airport in New Jersey.

In the first quarter, U.S. banks imported $75 billion worth of gold bars into the country. That’s roughly triple the previous record of quarterly inflows. JPMorgan alone took delivery of more than $4 billion in gold, against gold futures contracts expiring in February. That was the second-largest single delivery in the history of the COMEX – the futures and options market for gold and silver.

If you heard about any of this (and you probably didn’t), you were told these massive gold purchases weren’t meaningful… just “trading desks” or “arbitrage.” Later in the spring, the line was that it was because of the risk of tariffs being imposed.

No one – absolutely no one – told you the real reason. There are very good reasons why no one will talk about this…

There are enormous sums of money at stake. In fact, what’s at stake is all the money in the world. The most important change to the world’s monetary system since 1971 is happening: Gold is being re-monetized.

To understand what’s taking place, you have to understand what counts as “money” in the world’s banking system. Since the end of World War II and the Bretton Woods agreement, which established the current system, the monetary base of the world’s financial system has been U.S. government obligations – U.S. Treasury bills, notes, and bonds. And because the dollar (after August 1971) was no longer linked to gold at a fixed rate, gold played no practical role in the monetary system at all.

Today, the Bank for International Settlements (“BIS”), headquartered in Basel, Switzerland, sets international banking standards among the G20 group of industrialized nations. And the critical rule-making body at the BIS, The Basel Committee on Banking Supervision, is a consortium of central bankers and regulators from 28 jurisdictions, including the U.S. Federal Reserve, the European Central Bank, and the People’s Bank of China.

Starting in 1988, “Basel I” introduced a comprehensive framework for standardizing capital requirements for the world’s largest commercial banks. These rules introduced the concept of risk-weighted assets, meaning that different kinds of assets would count (or be discounted) by regulators toward the required reserves of each bank.