China Approves Fund That Will Invest In Foreign Gold ETFs, Opening Avenue For Millions Of Mainland Investors

Tyler Durden's picture

And here is the catalyst: China has approved a fund that will invest in gold exchange-traded funds outside the country, opening the door to mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation. Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund. Next stop: gold much higher as the bubble mania is really unleased in such ETFs as GLD, UGL and PHYS.

More from Dow Jones:

Beijing-based Lion Fund Management Co. said they received approval from the China Securities Regulatory Commission on Monday to proceed with the fund.

"Over the longer term it should be another factor to add to gold's support," said Carlos Sanchez, associate director of research with CPM Group in New York.

The move is a step in the development of the financial market in China, the world's second largest gold consumer behind India, and the No. 1 producer of the metal. It comes on the heels of an August move to increase the number of commercial banks allowed to import and export gold, broadening the domestic market beyond the five largest commercial banks.

Chinese gold imports have been climbing as the nation's central bank started to build gold reserves in recent years and domestic interest in gold investment grew. China's gold lobby has long pressured the government to raise its gold holdings.

A first of its kind for mainland China, the fund brings Chinese buying power to an increasingly popular way for participants to invest in gold.

Then again, China may not need to come to the US for this. They may just stay with their own completely fraudulent exchanges, where ETFs will be backed not even by paper gold, but literally by paper:

"I wouldn't be surprised to see China come up with an ETF themselves for gold," Sanchez said.

The investor-led gold buying--which has also sent futures to a record $1,424.30 earlier this month and boosted shares of gold miners--comes as participants are betting gold will hold its value more strongly than other holdings like the U.S. dollar or dollar- based investments.

And so talk of a gold bubble may finally resume. Of course, it will first require that gold complete a NFLX-like move of about 1,000% higher before anyone take such talk seriously (or else NFLX itself may be, gasp, a bubble).

h/t London Dude Trader

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midtowng's picture

At the end of October the I.M.F. had 32.7 tonnes of gold left to be sold. In September they sold 32 tonnes of gold and in October 19.5 tonnes, in the open market. Should they continue selling at the pace of September then we would expect to hear the announcement in December and probably in the first half of December. If they continued the slower pace of selling of October then we will have to wait until January 2011 for the announcement. We believe that this is significant because it will signal the real end of "Official" selling of gold. The signatories of the Central Bank Gold Agreement, with the exception of small deals in coins have not sold for over a year now. With the completion of the I.M.F. sales the annual 400 tonnes of 'official' selling will not be available to the market.

Quinvarius's picture

The IMF has stopped selling because the central banks are going to run gold to the moon to balance out the debts of gold holding countries.  The fix is on.  But it is the opposite of the preious fix.

dlmaniac's picture

I hope they are not rushing to the fraudulent GLD. Send them straight to CRIMEX. We could use some more squeeze to bust the manipulation.

Captain Courageous's picture

So is the fix of a fix still a fix....???



cossack55's picture

Do you think the CSRC downloads roundeye, large-breasted women in all kinds of kinky activities all day while at work too?

Ragnarok's picture

No that's what I call expanding your market.

MeTarzanUjane's picture

A direct hit to the USD by a binary drone.

Turd Ferguson's picture

More like a direct hit to the Death Star and the Evil Empire.

Bob Sponge's picture

Can other Chinese PM funds be far behind this gold fund?

ThreeTrees's picture

If China is a bubble and this just opened the world up to pent-up demand from the Chinese, just what kind of leverage has been applied to these RMB now chasing gold and what will happen to that demand once the Chinese bubble pops and begins to deflate?

Raynja's picture

Happy holidays with this gift

Mr Lennon Hendrix's picture

That rumbling sound is the stomach of Chinese paper chasers.

OutLookingIn's picture


 Just what the world needs - another gold ETF paper derivative!

Good! Let the paper flow! Crank it up! Eventually to blow up!

Owning the real physical thing is looking better all the time!

chinaguy's picture

Uh huh, & especially one backed by the full faith of the "China Securities Regulatory Commission "  What a disaster in the making .

Heck, I want a 3X of that sucker.

redpill's picture

You can't eat gold, but if desperate enough, you could eat frothy ChiComs

RobotTrader's picture

So far, the Cartel has successfully capped GLD and NEM gains today to a paltry 1.5%.

Looks like they one the battle again. 

If only NEM traded as successfully as NFLX......


tmosley's picture

They "one" the battle?

What is wrong with you?

Arius's picture

freudian slip - even he can't say "won" and it is just "one" deep inside he knows tomorrow will be different...

TSA aka "The Smart Ass"

DarkMath's picture

Robot, you're not allowed to comment on any Gold stories since the price went above 1380...again. Oh and you're not allowed to comment on any Oil stories since the price went above 84...again.

And one other thing you can't vilify Robert Prechter and then agree with him at the same time. You can't have your cake and eat it too.


Arius's picture

why not?  Gartman has been making the wrong calls on gold from 300 all the way up to 1300 and he still is on CNBS...robo can at least have an audience here - it gets boring if all need a punching bag...

dark pools of soros's picture

he can if he goes back to posting more boobies

tallystick's picture

I suppose that's the same definition of success you use trading your own account?

cougar_w's picture

This sounds to me like the Chinese trying to divert money out of other bubbles (comm and res real estate) and into a new one (gold paper) just in time for a crash in the former. That puts them about 2 years behind the US in Standard Bubble Time. Note that they can easily destroy hot money in their own economy by nuking gold paper holders at will.

It's a trap.

DarkMath's picture


GLD isn't an ETF but a paper vehicle used to suppress the Gold price. You could drive a truck through the custodial agreements. GLD is for chumps. GLD is the only Gold ETF that trades at a discount to the actual Gold price. Why is that? It's because the market doesn't believe it's has unencumbered Gold.

Jason T's picture

They earned it.  The pay people to work in China, we pay people not to work in America.

dark pools of soros's picture

as long as americans don't save, they'll still get thier free money..  it is just a wealth transfer from the future to the McDonald's, Gallo Wine, etc companies today...



Temporalist's picture
Why Eric Sprott sees silver as the next big investing windfall

"How high will gold go?

I think gold is the reserve currency today. There is not a currency in the world that it hasn’t appreciated against by at least 300 per cent. And it has beaten every stock market. You can’t even rent a safety deposit box in Germany because they are all full of gold and silver … I am pretty convinced that gold will go a lot higher because it is under-owned as only 1 per cent of people’s money is in it. It could go to $2,000 an ounce. I could imagine it at $5,000. I am not giving a time frame on that, but I could certainly see that happening. But the real story now is silver.

Why are you more bullish on that metal?

Gold has traded at a ratio of 16-to-1 to silver in terms of price, but today it trades in the range of 50 to 1. I think the gold-to-silver ratio is going to go back to 16 to 1 given the passage of time, say three to five years. And I bet you that silver overshoots. The gold-to-silver ratio may even get down to 10 to 1. I believe that the price of silver has been suppressed."

Blindweb's picture

While I am heavily overweighted in silver, I do worry about the price if we have an energy crisis and industrial demand collapses.

DosZap's picture

60/40 bro............

Gold goes up stairs and comes down the elevator.

Silver goes up the elevator, and falls out a window.

Personally, if your in a price position, I would sell some slvr, and buy Gold.

If your really upside down.Silver(even in this climate ) could drop back to 12-$16, in a nano second.

Gold also (can drop quickly) ,but nowhere near as  volatile as Slvr.

Remember Gold IS Money.(not considered a Commodity by people who know).

Banks do not hold Silver(damn sure should though).

Of course with the globe now running scared, who knows what will happen to its prices.

dark pools of soros's picture

you might be right..   its around 9 bars of silver for 5 grams of gold..  I might need to convert some or atleast see how the local dealers react to it..

Windemup's picture

Wait a minute. With 2 billion Chinese, there isn't enough gold to go around. Stop Stop. Don't do it.

MeTarzanUjane's picture

The golden elevator bitchez.

ShankyS's picture

As Cramer screams, "sell, sell, sell" which will be followed by a GS lowering of target price.

apberusdisvet's picture


Read this news last night; no mention in MSM but of course no gold bull news is allowed by the propagandists.  Some of you think this is a head fake, but I see it more as an alternative to move people off the soon to pop real estate bubble.

MsCreant's picture

The Chinese need a way to bring the price of gold down, too. They sell gold they don't have into the system via paper, and they too can be lying, thieving, cheats, and buy physical gold at depressed prices. If I was right about this, this would be mid-term scroomage on the price of gold.

DarkMath's picture

Very good point. China could be doing what we did with GLD: siphon off demand and keep the price down.

MarketTruth's picture

In China investors can literally walk into banks and buy PHYSICAL gold. Not just one or two banks mind you, MANY banks sell physical gold.

MeTarzanUjane's picture

Exlent point. So why the fuck would they buy some American ETF paper promise?

Temporalist's picture

Perhaps they'd pump the price up to some ridiculous amount, using worthless dollars, then watch it crash because they can't possibly be holding what they claim.

Ace Ventura's picture

Don't think they're buying American ETF paper....but rather Chinese ETF paper. No actual difference in what you are actually getting mind you, but it's all about perception these days.

As someone here already posted, this is likely another gold-price-suppression method. China would certainly prefer to keep growing its gold reserves at non-rocketing prices.

cougar_w's picture

Or they keep the gold and sell physical tungsten. It's a control state, who would you complain to?

"Yes sir, that is indeed gold-plated tungsten. You are very clever! We will inform your next of kin how very clever you were."

SilverRhino's picture

I'll leave it to the Chinese to be the first ones to develop the gold-tungsten panda bullion round.   Won't take long with all that hot $$ flowing around in there.


DosZap's picture

Newsflash, they already have, not the Panda but other countries.

New_Meat's picture

"... We will inform your next of kin how very clever you were."

"Oh, and we have prepared your invoice, please sign here, you will be billed for one bullet."

OutLookingIn's picture

Not only just banks!

The government have opened small boutique style stores all over China, selling nothing but gold and silver bullion,coins,trinkets, jewellery, etc.

Wu Qi Ming's picture

In China investors can literally walk into banks and buy PHYSICAL gold. Not just one or two banks mind you, MANY banks sell physical gold.

While that's true as well as being numerous Gold shops selling physical bullion too, this is a bit of a no news story to me. For at least 2 years Gold and Silver ETF's have traded at the 4 primary banks (Bank of China, China Construction, Industrial & Commercial and Agricultural Banks). It can all be bought and sold from the comfort of your computer desk with mouse clicks. What's more is that it can be traded in both $US and/ or RMB. Thats been some juicy arbitrage.

Guillotines And Head Baskets R Us's picture

Today is my birthday! So what! Buy real gold and silver before they stop makin' the stuff out of paper (ETFs).