Ann: Ulysses Mineral Resource Increases to 1.6 Million Ounces, page-20

"No more naked shorts on paper gold and Physicals up to Tier 1 with 1:1 allocation requirement can only be good for the physical gold market.
Unless the analysts have missed something? The naked shorts on paper being closed before audit deadline is what we are supposedly witnessing now....."

I think most of the "analysts" spruiking this theory are actually goldbugs, which is where the misinformation is coming from.

What they have missed is that increasing the assigned risk weight for physical gold from 50% to 100% required net stable funding ratio (NSFR), (which is part of the Basel III liquidity standards), raises the amount of stable funding needed to support physical gold holdings, and therefore increases the costs of holding gold.

It has nothing to do with the amount of physical gold required to back futures contracts. Under the proposed Basel III rules , gold is currently not assigned a risk weight for the purposes of assessing bank capital adequacy. The required net stable funding ratio (NSFR) is part of the Basel III liquidity standards, not the capital standards.

Any change that increases the stable funding ratio will increase the cost of carrying that asset. Thus, increasing the NSFR for physical gold is not bullish, but in fact a disincentive to hold physical due to the increase costs of carry. To decrease these costs, the banks can just switch to alternate assets away from physical gold.