Is this good news ?, page-5

The component of Basel 3 that will bring good news is the NSFR (Net Stable Funding Ratio). My understanding of this NSFR requirement is that the bullion banks must hold liquid asset up to 85% the value of gold contracts. Current liquidity backing for gold contracts is in the 5-6% range. Therefore increasing the liquidity backing will mean less volume of gold contracts aka paper gold. This is supposedly to be good for gold price because there is less scope for bullion banks to manipulate gold price.

However the Basel 3 NSFR requirement kicks in on 28th June for EU banks i.e. affecting mostly LBMA contracts whereas as I understand, the Basel 3 NSFR requirement only comes into effect for the US bullion banks some time in Jan 2022 (perhaps someone can verify this schedule). I also read somewhere that LBMA (EU) contracts are generally long position in nature whereas COMEX (US) contracts are generally short positioned. If so, then the 28th June deadline can only mean more pain to gold price due to the above scenario: less long position contracts (LBMA) and unchanged short position contracts (COMEX) implies more selling pressure. Perhaps this may explain why gold price has been weak in the past few months leading to 28th June. On the bright side, it could just be the pain (but who needs this though) before the reward!

GLTA today and the coming days. Cheers.