U.S. Global Investors: A Strategic Play on Gold’s New Era Under Basel III

The reclassification of gold as a Tier 1 High-Quality Liquid Asset (HQLA) under Basel III marks a seismic shift in global finance, elevating the precious metal to a status previously reserved for cash and top-rated government bonds. As of July 1, 2025, allocated physical gold can now be counted at 100% of its market value toward liquidity reserves, a regulatory upgrade that underscores its role as a cornerstone of institutional capital management [1]. This change, long advocated by gold proponents, aligns with central banks’ growing appetite for the metal and positions gold as a critical hedge against currency devaluation and geopolitical instability [2]. For investors, the implications are profound—and for U.S. Global Investors, a firm deeply entrenched in the gold and precious metals sector, the reclassification represents a catalyst for accelerated growth.

Gold’s Regulatory Rebirth: From Peripheral to Core

Under Basel III’s “Endgame” reforms, gold’s reclassification resolves a long-standing inconsistency in its treatment. Previously, gold held a 0% risk weight for capital adequacy but was excluded from HQLA liquidity requirements, creating a regulatory limbo where it was valued for capital but not for liquidity [3]. The new Tier 1 designation eliminates this inefficiency, allowing banks to hold gold without sacrificing liquidity coverage ratios (LCRs). This shift not only enhances gold’s utility for financial institutions but also reinforces its status as a “real money” asset, capable of absorbing systemic shocks during crises [4].

The regulatory upgrade is not merely symbolic. By enabling banks to treat gold as cash-like collateral, Basel III’s reforms are expected to spur greater institutional demand for the metal. For example, central banks—already the largest buyers of gold in 2025—have added 166 tonnes to their reserves in Q2 alone, with 76% of surveyed institutions planning to increase holdings over the next five years [5]. This trend, driven by diversification away from the U.S. dollar and inflationary pressures, creates a self-reinforcing cycle: higher demand from central banks drives up gold prices, which in turn incentivizes commercial banks and investors to allocate more capital to the asset [6].

U.S. Global Investors: Capitalizing on the Gold Renaissance

U.S. Global Investors, a long-time advocate for gold’s strategic value, is uniquely positioned to benefit from this regulatory and market transformation. The firm’s product lineup, including the Gold and Precious Metals Fund (USERX) and the World Precious Minerals Fund (UNWPX), offers investors direct exposure to gold and mining equities, aligning with the growing institutional and retail interest in the sector [7]. The firm’s expertise in niche markets and its focus on macroeconomic trends—such as the interplay between interest rates and gold prices—further strengthen its value proposition.

A key catalyst for investor engagement is the company’s upcoming fiscal 2025 webcast on September 9, 2025, where CEO and Chief Investment Officer Frank Holmes will discuss the implications of Basel III’s reclassification and the role of gold in a post-rate-hike environment [8]. This event, coupled with the release of fiscal 2025 financial results, provides a platform to highlight the firm’s strategic alignment with gold’s new era. For instance, the webcast will explore how declining interest rates—a potential outcome of the Federal Reserve’s policy shifts—could amplify gold’s appeal as a non-yielding but inflation-protected asset [9].

Strategic Implications for Investors

The confluence of regulatory upgrades, central bank demand, and U.S. Global Investors’ product offerings creates a compelling investment narrative. For banks, the Tier 1 designation reduces capital inefficiencies and enhances liquidity resilience, indirectly boosting demand for gold-backed financial instruments. For investors, the firm’s funds provide a diversified pathway to capitalize on both physical gold and the equities of mining companies, which stand to gain from higher gold prices and increased exploration activity [10].

However, risks remain. While the reclassification validates gold’s role in the financial system, it does not guarantee sustained price gains. Macroeconomic volatility, such as unexpected inflation moderation or a Fed pivot to tighter policy, could temper demand. Additionally, the London Bullion Market Association’s clarification that gold is not officially recognized as an HQLA under Basel III—despite its Tier 1 status—introduces ambiguity that could limit adoption [11].

Conclusion

The Basel III reclassification of gold as a Tier 1 asset is a watershed moment, bridging the gap between its historical role as a store of value and its modern utility as a liquidity buffer. For U.S. Global Investors, this regulatory shift, combined with central bank buying trends and strategic investor engagement initiatives like the September 2025 webcast, positions the firm as a key player in gold’s new era. As the financial system adapts to a post-pandemic landscape marked by geopolitical uncertainty and currency devaluation risks, gold’s renaissance—and the firms that facilitate access to it—will likely remain central to portfolio strategies.

Source:
[1] Gold Goes Full Reserve Asset as Basel III Elevates It to Tier 1 Status, [https://www.usfunds.com/resource/gold-goes-full-reserve-asset-as-basel-iii-elevates-it-to-tier-1-status/]
[2] Basel III Makes It Official: Gold Is Money Again, [https://www.usfunds.com/resource/basel-iii-makes-it-official-gold-is-money-again/]
[3] Gold's Treatment Under Basel III: Clarifying Regulatory, [https://www.incrementum.li/journal/golds-treatment-under-basel-iii/]
[4] The Basel Framework and Regulatory Status of Gold, [https://www.regulationtomorrow.com/france/capital-requirements/the-basel-framework-and-regulatory-status-of-gold-clarifying-the-status-quo/]
[5] Gold Demand Trends: Q2 2025, [https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q2-2025]
[6] Gold Surges as Investors Brace for Rate Cuts and Sticky Inflation, [https://www.interactivebrokers.com/campus/traders-insight/securities/macro/gold-surges-as-investors-brace-for-rate-cuts-and-sticky-inflation/]
[7] U.S. Global Investors - USFunds, [https://www.usfunds.com/]
[8] U.S. Global Investors Announces Fiscal 2025 Webcast, [https://www.marketscreener.com/news/u-s-global-investors-announces-fiscal-2025-webcast-ce7d59d9dc8cf122]
[9] Gold and Rates | Webcast, [https://usglobaletfs.com/insights/zoom-meetings/gold-and-rates-understanding-the-interest-rate-influence-on-mining-stocks/]
[10] Gold Goes Full Reserve Asset As Basel III Elevates It To Tier 1 Status, [https://www.forbes.com/sites/greatspeculations/2025/05/12/gold-goes-full-reserve-asset-as-basel-iii-elevates-it-to-tier-1-status/]
[11] Gold's Big Reclassification? Not Happening, [https://www.goldcore.com/blog/golds-big-reclassification-not-happening]