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>>> China announces they will be setting new gold price by end of year


June 25, 2015

Examiner.com


http://www.examiner.com/article/china-announces-they-will-be-setting-new-gold-price-by-end-of-year


On June 25, a representative from the Shanghai Gold Exchange announced that they are planning on establishing a new physical gold price mechanism by the end of the year that will compete with London and the U.S. Comex. Expected to be denominated in Yuan, this new gold price platform comes less than 10 days after China became the first Asian country invited to be a part of the London gold fix, and unlike the U.S. Comex, will deal in direct physical gold sales rather than in paper futures and derivative contracts.

When the Shanghai Gold Exchange (SGE) opened in 2014, it set out to usurp the West's control over gold and their pricing of gold through the paper markets. And in less than a year, the SGE has created the world's largest gold fund, and is now ready to take over pricing and price discovery for the monetary metal. In fact, sources claim that right now premiums on large sales of gold bullion are ranging as high as $600 over the current paper spot price.

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A yuan-denominated gold fix will be launched by year-end via the Shanghai Gold Exchange to give the world's biggest producer and leading consumer of bullion more influence over pricing.

The first public confirmation made by an exchange official comes after Reuters cited sources in February on the proposal for the fix to be set through trading on the SGE, the world's biggest physical bullion exchange.

"We will be introducing a yuan-denominated fix at the right moment. We hope to introduce (it) by the end of the year," SGE Vice-President Shen Gang said at the LBMA Bullion Market Forum in Shanghai on Thursday.

"We have policy support for development (of the gold market)," she added. - China Daily

The most interesting thing that will occur from this gold pricing policy is how London and the Comex will deal with the metal should China suddenly set the price far above the current paper spot. If the West still has alot of physical gold in their reserves, they can make a large amount of money arbitraging their buy price with China's sell price. However, it appears for the most part that the amount of gold remaining in London and Comex vaults is limited, and they will be unable to stop the Far Eastern market from determining the physical price should they decide to raise it to much higher levels.

The gold markets in the West have been drained for some time, and are now simply derivatives markets that are protected by London's ability to price gold much lower than supply and demand dictates. And since the Comex has not actually delivered any metals for more than two years despite them being a futures delivery market, the potential that China's move to take over physical gold pricing within the next six months could very easily cause a derivatives meltdown, and drive the price of gold even higher than the SGE might set it at.

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