➡ The article discusses the concept of tier 1 assets in banking, which are considered high quality and can be easily converted into cash. These assets, which include cash, government bonds, and gold, are used by banks as a buffer during economic downturns. The article also explains how the government can manipulate the market by changing the tier of an asset, such as gold, which can affect its value and the amount of cash a bank can get for it. The author uses the example of a pawn shop to illustrate this concept.
➡ In the past, people used gold and silver coins to buy things, not dollars. Gold and silver were considered valuable because they were rare and couldn’t be destroyed. Today, gold is still seen as valuable, but silver isn’t as much because it’s used in industries like electronics and film. If silver was made as valuable as gold (a tier one asset), it could disrupt the economy.
➡ The market for silver and gold has been unstable, with silver being sold off more frequently. This is due to factors like margin hikes and the upcoming election causing uncertainty. However, gold is now considered a tier one asset, meaning it’s highly valued, especially by governments. Despite the current instability, the market is expected to stabilize and possibly appreciate after the election.

And the bank says, well, how badly do I want the gold? How badly do I need the money? And the government says, you need the money because your reserve requirements need to be here and they’re there and you don’t have enough money in your bank. So the bank says, all right, they sell their gold. And that’s the manipulated market structure. And that’s why traders say, well, I guess I’ll be sure. Welcome to the Morning Markets and Metals with Vince Lancy. Where each morning Vince brings you the financial and precious metals news to get you ready for your day.

And now here’s Vince. Good morning, everyone. It’s Friday at Vince Lancy and we’re going to do the market rundown. We’re going to talk about tier one assets as it relates to gold and silver and manipulation. Part one. Start with the markets. The dollar is $1,407. Up 18, 10-year yields are $429. Unchanged bid. The S&P 500 is $5730. Bouncing 26 handles after yesterday’s sell-off. The VIX is $22.18. Backing off almost a full percentage point after yesterday’s rally. Gold, $27.52. Up a little under $9. Bounce after yesterday’s give back. But it bounced off the lows before the close yesterday.

All right. So silver, $32.81. Up 15. Tap it at best. Copper, $4.33, $4.34. Down a little less than a penny. WTI is up 23 at $71.32. Natural gas, $2.33 unchanged. Bitcoin, $70,063. Vibrating at $70,000. Ethereum, $25, $17. Unchanged basically. Plame, $1,126. Up seven. Platinum, $9.92. Down one. Grains, drum roll please. All up. You can see that on your screen there. Spare my eyes and I’ll spare yours. Okay. You can see the markets there. We’ll talk about the gold and silver and everything else. But first, let’s talk about tier 1 assets and Basel 3 and as it relates to manipulation, as it relates to gold, and as it relates to silver.

Now manipulation is a word that in our little community, people debate about. And people that are, that I respect that know what they’re talking about say that there is no manipulation. And I’m not here to debate them on that. I’m here to say that we probably define the manipulation different. So there are people who define it one way, which is their way. And there’s people who define it another way, which is to say that there’s no manipulation because of how they define it. And then there’s, I think people like me who define it the way I do that says there is manipulation because of the way we define it beyond the micro day-to-day manipulation.

But it’s really a matter of semantics. Okay. So let’s talk about tier 1 assets and how they work and how it works against gold and silver and premium. And I’ll give you a little bit of an education of a silver speculator in the premium section today. Okay. So homepage, Goldman central bank demand has reset gold’s price levels. That’s yesterday’s post. Don’t be an exit strategy. We re-pin that because hey, the election’s coming in, don’t be stupid. Right? And then Thursday PM has the rest of our posts. Discussion. All right. I don’t have any great visual aids today.

Not that I ever do, but you get the point. In banking terms, what is a tier 1 asset? A tier 1 asset is considered the highest quality and most liquid, meaning it can be readily converted into cash without significant loss in value. According to the Basel III regulatory framework, which outlines asset classifications for banks to ensure stability, the following assets are typically considered tier 1, typically means automatically. This is textbook definition. All right. Cash and cash equivalence. This includes physical cash held by banks as well as cash reserves held with central banks.

Sovereign bonds. Those are government issued bonds from countries considered highly credit where the US treasuries and other similar bonds from triple A rated governments are included here or double A plus or whatever they are now, right? Or triple C probably by the time this is over. Central bank reserves. Reserves held by commercial banks at central banks are treated as tier 1 since they are secure and instantly accessible. And newly done gold, as noted under Basel III, gold was elevated to a tier 1 asset. Should say reinstated as a tier 1 asset, meaning it is viewed as a high quality liquid asset on par with cash and government bonds.

Continuing with the with the definition. These assets are viewed as highly liquid and stable, serving as the cornerstone of financial stability within banks. Tier 1 assets act as a buffer against crises, ensuring banks can meet short term obligations even during economic downturns. Okay. This definition, I sourced many different definitions to make sure that I knew what I was talking about. And this action, this one is actually chat GPT combined with some things that that I wrote. So this is the definition. The thing is, what does that mean? What does it mean to be tier one, practically speaking? And as I without boring you too much, I’m going to get into this and you’re going to see how the labeling of something is tier one versus tier three immediately makes it worth less or more.

All right. So to be tier one is the government saying we will fully allow you to use it as 100% cash to conduct your business without converting it to cash. We swear by its value and this backstops our whole government. So if a bank says, I need money. It’s a crisis. The government says, what do you have is collateral. It’s a pawn shop. Okay. The government says, what do you have is collateral. And the bank says, I have a 10 speed Schwinn bicycle, uh, from 1975. And they say, well, you know, we’re not going to give you more than five cents for that.

And then they say, I have gold. And you say, and the government says, sure, we’ll take gold. Meaning you give us the gold as collateral. This is why it’s all about collateral, right? And we’ll give you cash, 100% of face value, whatever the price is. Okay. And of course, there’s margin liquidity and things like that. But the point is, if you go to the bank, to the government with your bicycle and they say, we’ll give you 10 cents for it. And you said, dude, it’s worth $200. And they say, well, we don’t care.

It’s worth 10 cents to us. That’s all we’re going to give you because it’s not liquid. We can’t get out if we want to, we’re not going to backstop our government with rusty Schwinn, 10 speed bicycles. Do you remember the movie trading places where, um, what’s his name? Winthrop goes in and he says, this is a whatever watch, you know, and, uh, and Bo Diddley says, $50. He goes, this is a $3,000 watch or whatever it is. He says, well, in Philadelphia, it’s only worth $50. So Bo Diddley behind the counter at the pawnbroker shop, he’s the government and he tells you what it’s worth, what he’ll give you for it.

And we’re going to get into this in more detail in the premium section. When I discussed silver, a real life example of this, that just like completely blew me away. All right. So the government says we will backstop our government with this and we want it. If there’s ever a problem, we’ll take it as collateral. It’s as good as gold, right? So we’ll take government bonds. We’ll take our currency and we’ll take gold once upon a time. And those are things that we deem worthy of collateral to give you a hundred percent face value for, you know, there’s always haircuts in there.

And then they said, wait a minute. People are putting using gold as collateral. That means they’re owning gold. If they’re owning gold and we’re giving them cash, we’re, we’re putting gold on a value on a par with our own bonds. Let’s demote it to tier three. So now the bank says gold’s now tier three. Boom. Now the bank says, I need cash. I need cash. And they go to the pawnbroker, which is the repo, the government repo, and they say, I need cash. I have a million dollars in gold. The government says, we’ll give you 500,000 for it.

Tier three is art. We’ll give you 50% of face value on the art. That’s the haircut. They would call it. And the bank says, well, 50%, I mean, it’s worth a million dollars. And the government says, so sell it for a million dollars and you have the cash. You don’t need us. You’ve got liquid markets. And the bank says, well, how badly do I want the gold? How badly do I need the money? And the government says, you need the money because your reserve requirements need to be here and they’re there and you don’t have enough money in your bank.

Remember, fractional reserve banking. So the bank says, all right, they sell their gold. And that’s the manipulated market structure. And that’s why traders say, well, I guess I’ll be short. Why be long, right? Okay. So that’s how they stopped gold from competing with other stuff. All right. So that’s why, just to go back a little bit of history here, that’s why no one cared what gold was worth in dollars back in the day. Like, you know, back in medieval times, you didn’t say, I want to buy a meal. How much does it cost? The guy at the counter said, it’s a shilling.

It’s a silver coin. It’s two silver coins. It was always that amount. It’s a silver coin, right? A meal was a silver coin. A suit is an ounce of gold, right? So you didn’t measure things in dollars. You measured things in a meal as a silver coin. You worked for a silver coin, right? A suit is an ounce of gold. And these things were your standards. So dollars were measured in ounces. How many dollars can I get for an ounce? Who cares? An ounce of gold is what buys the suit. And then they just flip the whole metric.

Anyway, I’m getting off of it. So gold goes from tier one to tier three. You can’t get face value for it in a pinch. So why on it? Right? Right. What now, let’s talk about silver as it relates to tier one versus tier three. What makes something ineligible for tier one status? Demand outside of monetary use competes with the government’s ability to control it. So what’s gold used for? I know it’s used for electronics, but just you and me here. Gold’s used for nothing. It’s useless. And that’s why it’s money because you can only use it as a story value.

It holds its value. It exists. It’s there all the time and it’s not used. So the government even though it’s a pain in the ass, they try and control it. They buy as much as they can. They’ll probably choose a bit down the road. Silver, also a store value also can’t be like silver is better than gold in this regard. Silver can’t be destroyed. It actually is more useful. And the problem is its usefulness makes it practical because it’s practical industry needs it. So if you have a film company, you know, back in the day or an electronics company today that says, well, you know, we have a lot of so well, they have a lot of money.

You can’t have a commodity that can be hoarded as money because it takes control away from the government. The government can’t say you can’t own silver because you use it in industry and the government can’t make it money because you use it in industry. So, you know, I mean, you could do it, but, you know, there’s there’s a lot of things that you have to do. All right. So if silver were made a tier one asset, so here’s the here’s the payoff. If silver were made a tier one asset, it would appreciate to its value as naturally carrying in nature, naturally carrying in nature relative to gold, whether that’s 15 to one or seven to one, it’s debatable.

But that’s what happened. If gold is worth X, because it’s now a tier one asset and silver becomes a tier one asset, then you bind it in nature. Why is gold a tier one asset? Because it can’t be destroyed because it’s, you know, it’s a store of value. Well, so is a tier one asset. It’s a store of value. So that’s what would happen. You would you would completely destroy. You probably would you probably would undermine the whole Western economy if you made silver tier one asset, you know, you can dream. All right.

So I’m looking at my notes here on the left. So tier one asset. OK, so we’re going to go this is going to be two part or but the part we’re going to talk about in premium is going to be a little bit more detail and some examples and a very real moment where I went, oh, shit, I can’t do that because it’s tier three that I’ll share with you guys. All right. So next news and analysis. Goldman Central Bank demand has reset gold price levels. You sold us here, right? Bank of Bank of America is for founders.

Cash falls to the lowest level in our data history. It goes back to, I think, 2011, maybe 2015. But cash levels are so low now, meaning everyone’s put their money into stocks that there’s really not much money left to go into stocks, which is one of the reasons that we would sell off. So people are deploying cash, expecting the Fed to ease. It would be kicking the ass if the Fed did not ease. Sanctions squeeze Russia on U.S. dollar payments to Shanghai Cooperative. That’s an example of sanctions working, although I don’t really think it’s it’s it’s a nasty headline and it’s true, but it’s not a permanent problem.

So Russia owes money to the Shanghai Cooperative, which is part of the the BRICS, the BRICS cooperative in general. And the Shanghai cooperatives laws say that they can only take dollars. And so Russia doesn’t have any dollars, so they can’t pay. And so they’re going to change the rules to accommodate that. All right. Data on deck. Unemployment is today. This could be why we’re bouncing. People are squaring up before the number. But everything is starting to that is starting to creep in the hole. We’re not going to ease type of stuff, but, you know, who knows? And premium education of a silver speculator.

We’re going to touch on a lot of things there, but there’s a more there’s a deeper explanation of all this. And I’ll just I’ll just leave it leave it with you like this. If the government doesn’t want gold and silver competing with dollars as a store of value or treasuries as a store of value, it demotes it to tier three. That’s why when Bernanke says it’s tradition, everyone had that conversation with with with Ron Paul. When he said this tradition, he was implying that, hey, it’s a reserve asset, but we’re not going to give you 100 percent face value for it.

It’s a piece of art. It’s a Monet. It’s a Van Gogh. It’s a it’s a piece of art. We’ll give 50 percent for it. But, you know, I mean, it’s you know, it’s really, you know, so they you cook the market structure to demote gold. OK, this is just it’s really it’s really fascinating. You tell the banks that you’re not going to give them face value for it anymore. And you say, because it’s not you say, because it’s not liquid, we can’t trust it. And so you make it not liquid doing that.

And then the day you do that, not the day, but pretend it’s the day, the day you do that, you create futures. And on that same day, the IMF says it’s 1976, roughly the IMF says we’re going to sell all of our gold because it’s no longer official. And so they show you the price dropping from selling the gold. And the banks say, well, I guess we’re never going back to the gold standard. And they say they won’t give me face value for it, but they’ll give me face value for for Greek bonds.

So shit. All right. I’ll sell my gold and I’ll take the cash. Or if you’re a bullion bank, you hold your gold and you short futures against it so you can take the cash and you could buy a nine percent bond in some other country. Use it as a carry trade. This is how you demote gold. You demote, you change the perception of gold by demoting it, which demotes it. It’s a self-fulfilling prophecy. It is management of public expectations, manipulation. And so if I’m a trader, as you’ll hear in the education of a silver speculator, I realized when I tried to do it the other way, I went, oh my God, I should never belong silver.

And that’s why I learned to be a bear once in a while. Okay. Let’s look at the market before we go into the premium section. I already gave you guys a piece of it. All right. So I need to buy more black turtlenecks. Please subscribe. All right. So gold is up nine and change. Silver is up 10 cents. All right. Quick take on this. Hourly stock chart. Now, this is to sell off yesterday. Okay. This is to sell the day before itself yesterday. This is to sell if we care about, right? So the stock market, just look at it visually from a technician’s point of view.

It drops. It goes sideways, skating on the bottom and now works itself higher in a thin market. All right. This is a good sign for gold. It’s not really a good sign for silver, but you’ll see why in a second. Now let’s look at gold. Yesterday, bigger drop, but I don’t care. It drops. And during the day, it immediately starts bouncing. It doesn’t skate on the bottom. It doesn’t roll off the table like it used to. It immediately starts to be bought. This is not necessarily an algorithm, but this is a buyer who’s saying, okay, that’s enough for today.

I need to buy some. I need to buy some. And they start buying it. And now overnight, it continues running and now it goes sideways. So we could be in for another sell off today. Now that’s sort of silver, right? Now think about gold kind of like a lopsided V shaped bottom. Now look at silver down barely like, you know, it’s a V with a broken leg, right? It’s almost, it’s only a little bit better than stocks. People are selling silver. And when they sell it, they’re less likely to buy it back.

Okay. So silver is getting what I would call marked up with gold normally. And by this, I mean, before 2022, I would say this is a market that’s ready to be sold again. It drops. We call it, it’s used to call it the marble bounce or rolled drops. It bounces on a table, right? And then it just rolls and just falls off. And that’s what the silver chart looks like on an hourly point of view. I’m not being bearish. I mean, I can be bearish, but I’m not being bearish with because of this.

This is a market stabilizing. Unless this market gets, you know, works down here, we’re done. So remember the last time. So why did the market sell off yesterday in gold? And so we’ll sold off because of margin hikes, which they knew were coming and they sold it ahead of time. That’s why gold and silver sold off with stocks. And those margin hikes were valid, but you know, that’s, you’re getting the hot money up. The margin hikes cause the market to drop, but usually in gold, usually pre-2022, the margin hike is the first level.

And then the second level is, Oh shit, we’re going to have to wait another six months to make money in gold. Sell it now tier three asset. That’s the psychology of it. But now it’s tier one. Now it’s like, you know what? It’s tier one. You know, why is it tier one now? Because governments want it. Oh, why do government, why do Western governments want it? Because the Chinese want it. Oh, well, maybe we got to stop them from buying it. Let’s make sure the banks don’t sell anymore. Let’s make it tier one and let’s give them cash face value for it.

That’s how it works. Anyway, back to this point, the point is normally I’d say, give it a couple of hours. Gold’s going to go lower and silver is going to go low with it. I don’t think that’s going to happen this time. I mean, not gold would, right? But that’s a situation, you know, the, the, the election is coming up. Will they raise margins again? You know what? I hope they raise margins five times in the next five days because I want the idiots out of this market, the tourists out of this market before the election so we can appreciate free of, of hot money having to sell it.

Now, you know, be careful what you wish for. I know is something happened. Think about, but that’s it. Okay. So it’s Friday. It’s silver and gold. It’s a shitty week elections next week. The market’s going to evolve up 50 down 50 up 100 down 200. You don’t know what’s going to happen over the next week. So, all right, so that’s the market. Stocks. Look, is that stocks or is that silver? It’s the same chart. Gold’s the one they’re buying on the dip. That’s it. Well, thanks for watching this morning’s markets and metals with Vince.

You sure appreciate you tuning in and starting your day with us here. Hope you enjoyed the show and we’ll see you again next week. Please note that this video is not intended as legal license, financial trading advice, and is to be used for informational purposes only. Please contact your financial advisor before making any decisions and thanks for watching. [tr:trw].

See more of Arcadia Economics on their Public Channel and the MPN Arcadia Economics channel.