Over the past three years, I’ve been incorporating physical gold-backed ETFs into an increasing number of client portfolios. This shift represents more than just a minor tactical adjustment—it reflects a fundamental evolution in how we perceive gold’s role in the modern investment landscape.
From Asset to Investment: Gold’s Evolving Status
Historically, our firm viewed gold as an “asset” but hesitated to classify it as a true “investment.” Its value fluctuations were primarily driven by fear sentiment during global conflicts and market volatility, or by industrial component and jewellery demand which really had little impact.
This perspective has changed dramatically. Gold has transformed into what we now consider an increasingly valuable investment, driven by two critical factors: Basel III regulatory changes and unprecedented international central bank buying.
Basel III: The Game-Changer for Gold
The implementation of Basel III banking regulations has profoundly impacted gold’s status in the financial system. For those unfamiliar, Basel III fundamentally altered how banks classify gold on their balance sheets—elevating it from a Tier 3 asset (valued at 50% of its market value) to a Tier 1 asset (valued at 100% of its market value).
As detailed in Richard Mills’ analysis for Ahead of the Herd, this regulatory framework introduced the Net Stable Funding Ratio (NSFR), requiring banks to hold enough stable funding to cover their long-term assets. Crucially, physical gold now receives a 100% Required Stable Funding (RSF) value, while “unallocated” or paper gold receives only 85% RSF. To simplify this, what it means is this creates a clear incentive for banks to hold physical gold rather than paper derivatives.
This regulatory shift has effectively placed physical gold on equal footing with cash and government bonds in the banking system. When major financial institutions began implementing these changes in 2019-2021, it triggered a substantial revaluation of gold across global markets. As the Atlantic Council has observed, these Basel III standards represent a significant recalibration of the global financial system, with ripple effects across asset classes—particularly benefiting traditional stores of value like gold.
The Global Currency Evolution
To understand gold’s current position, we must examine its historical context. Prior to the disruption of World War II, the global financial system operated on a gold standard, where major currencies were directly convertible to gold at fixed rates. This system provided stability but limited monetary flexibility.
The 1944 Bretton Woods agreement established the U.S. dollar as the world’s reserve currency, backed by gold until 1971 when President Nixon ended dollar convertibility. This created our current fiat currency system, where the dollar maintained its reserve currency status without gold backing.
Today, we’re witnessing what appears to be another pivotal transition. As Richard Mills notes in his analysis, Basel III may be inadvertently setting the stage for a new gold-backed monetary system. Nations including China, Russia, India, and several Middle Eastern countries are systematically increasing their gold reserves while analysing further ways to reduce reliance and exposure to U.S. dollar holdings. According to the World Gold Council, central banks purchased a record 1,136 tonnes of gold in 2022 and maintained strong buying through 2023-2024.
The Atlantic Council’s research suggests this trend aligns with broader concerns about “regulatory fragmentation” in the global financial system, as nations increasingly pursue financial sovereignty. Gold accumulation represents a tangible step toward reducing dependency on any single currency system.
The Numbers Tell the Story
Gold’s performance supports this structural shift. Since January 2020, gold prices have increased from approximately $1,520 per ounce to over $2,700 per ounce in early 2025—representing nearly an 80% gain. Compare this to the S&P 500’s volatility during the same period, and gold’s stabilizing influence becomes clear.
Looking further back, as noted by Ray Dalio’s analysis referenced in Ahead of the Herd, gold has appreciated from $35 per ounce in 1971 to over $2,700 today—a 7,600% increase. Yet Dalio suggests this could be “peanuts compared to what’s next” if current de-dollarization trends accelerate.
Strategic Implementation for High-Net-Worth Portfolios
For my high-net-worth clients, I typically recommend a 5-15% allocation to gold, depending on their overall financial position, risk tolerance, and time horizon. This allocation serves multiple purposes:
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Wealth preservation during periods of currency devaluation or inflation
- Portfolio diversification with an asset that often moves counter to traditional equity markets
- Crisis insurance against geopolitical instability or financial system stress
The implementation within a portfolio typically involves physical gold-backed ETFs for liquidity and storage efficiency. The advantage of an ETF backed by physical gold means that the investment is valued and reported on a daily basis and meets all audit requirements. The bullion is physically allocated and securely stored – and if desired, clients can request the gold holdings can be physically paid out and received (of course, secure delivery is at clients’ expense).
Looking Forward
While past performance never guarantees future results, the structural shifts supporting gold’s value proposition appear durable. Central bank buying shows no signs of abating, and the global monetary system continues to evolve in ways that enhance gold’s strategic importance.
The combined impact of Basel III regulations—particularly the Basel III Endgame proposals highlighted by the Atlantic Council—and geopolitical de-dollarization efforts creates what Richard Mills describes as a “perfect storm” for gold prices. As banks adjust to these new regulatory frameworks, the preference for physical gold over paper gold continues to reshape market dynamics in favor of higher valuations.
For high-net-worth individuals concerned with generational wealth preservation, gold provides a time-tested vehicle from the deepest histories of mankind that has provided value through centuries of economic fluctuations.
I invite you to consider whether your portfolio adequately addresses these changing dynamics. Sometimes, the most valuable additions to your financial strategy come from reconsidering assets we’ve long understood but perhaps overlooked and undervalued.
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If you require further information on how to get started or any of the above has struck a chord with you, feel free to reach out any way you wish (LinkedIn, telephone, email or other). I have clients all over Australia and the world, and always happy to have an initial discussion without cost or obligation.
*This article represents my professional assessment based on current market conditions and should not be considered personalized investment advice. All investments carry risk, and individual strategies should be developed in consultation with qualified financial advisors familiar with your specific circumstances.
The above is general information only and not personal advice. For further information or a confidential discussion, please contact the author directly.
