iGuide Special Report: Gold Becomes Tier 1 Asset on July 1, 2025

Beginning July 1, 2025, U.S. banks will finally align with Basel III international banking standards by reclassifying physical, allocated gold as a Tier 1 asset. This shift means that gold held physically in a bank’s vault will be counted at full market value toward a bank’s core capital reserves — a major regulatory change with far-reaching implications for both financial institutions and investors.

What Is Basel III?

Basel III is a comprehensive set of reform measures developed by the Basel Committee on Banking Supervision in response to the 2008 global financial crisis. Its core objective is to strengthen bank capital requirements, improve risk management, and enhance transparency across the banking system. Among other things, Basel III redefines what constitutes high-quality liquid assets (HQLAs) — those that can be quickly converted to cash in times of financial stress. Previously, gold was considered a Tier 3 asset with only partial value recognition. Under Basel III, physical gold — if held in allocated, insured, and audited form — is now recognized as a Tier 1 asset with zero risk weighting, on par with cash and sovereign debt.

Why the U.S. Was the Outlier

While Basel III has already been adopted by most major economies over the past decade, the United States has lagged behind in fully implementing these standards. Regulatory hesitancy, lobbying pressure, and the dominance of the U.S. dollar as the world’s primary reserve currency contributed to delays in embracing the reforms. U.S. policymakers were reluctant to grant Tier 1 status to gold, which could potentially shift capital flows away from Treasury bonds and undermine traditional monetary control mechanisms. However, mounting global pressure and the need to harmonize U.S. financial regulations with those of international counterparts have now compelled the Federal Reserve and U.S. banking regulators to adopt the Basel III “Endgame” framework starting July 2025.

How This Will Affect the Global Economy

This reclassification is expected to have a profound effect on the global economy. Gold, long viewed as a safe haven asset, will now be treated as a high-quality liquid asset across all major banking systems. Banks will be more inclined to hold physical gold to strengthen their balance sheets, potentially increasing institutional demand and supporting higher long-term gold prices. Moreover, this change could reduce reliance on paper gold instruments like ETFs and futures, which will continue to be treated as lower-tier assets with higher risk weightings.

North America's Regulatory Shift

Until now, North America — particularly the United States — has been an outlier in implementing the Basel III guidelines fully. While Europe and much of Asia had already adjusted their banking frameworks to elevate the status of physical gold, U.S. regulators maintained outdated capital classifications. That will change on July 1, 2025, when U.S. banks must adhere to the same global standards and can begin treating gold as Tier 1 capital.

Expected Surge in Demand for Physical Gold

The shift will likely reshape the gold market by tilting demand away from synthetic gold products and toward actual physical holdings. With banks motivated to stockpile real, allocated gold, investors may also follow suit, driving up the price and reducing market volatility traditionally associated with speculative gold instruments.

Conclusion: A Strategic Opportunity

For iGuide readers, this transformation presents a strategic opportunity. As central banks and financial institutions move to secure more physical gold, it might be wise for individual investors to consider holding some physical gold themselves. Including gold as part of a diversified portfolio may serve as a hedge against market instability and currency devaluation in the years ahead. Physical gold — unlike paper instruments — offers tangible security in an increasingly uncertain financial landscape.