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Shanghai Gold Exchange Launching International Bullion Exchange In Yuan Next Month
China Becoming Global Gold Hub And Gold Price Discovery Centre
China is moving closer to positioning itself as the physical gold trading hub of the world and the world’s gold price discovery centre. It is a natural progression for the largest economy in the world and for the world’s largest gold buyer, importer and indeed producer.
The Shanghai Gold Exchange (SGE) is launching its yuan denominated international bullion trading exchange next month. This is another important step in internationalising the yuan or renminbi and positioning it as an alternative global reserve currency.
Bloomberg reports this morning that
The Shanghai Gold Exchange plans to start bullion trading in the city’s free-trade zone on Sept. 26, according to three people with knowledge of the matter.
The people asked not to be identified because they aren’t authorized to speak to the media. Gu Wenshuo, a spokesman for the exchange, confirmed that the trading system is being tested, without giving further details.
Shanghai wants to become a regional bullion-trading hub, giving foreigners access to the world’s largest physical-gold market, Xu Luode, the exchange’s chairman, told a conference in Singapore in June.
The gold contract will be priced and settled in yuan and the infrastructure is in place for trading to start in the third quarter, Xu said in June. The zone will have a vault capable of holding 1,500 metric tons of gold, which can either be imported into China or be in transit to other markets, Xu said.
China is seeking to open up its bullion markets just as domestic demand weakens. Consumption contracted 19 percent in the first six months of the year, according to the China Gold Association. Bullion of 99.99 percent purity traded on the Shanghai Gold Exchange climbed 8.7 percent this year, damping demand which reached a record in 2013.
Reuters reports this morning that
China has allowed three more banks, including a foreign lender, to import gold, sources with direct knowledge of the matter said, as the world's top gold buyer gears up for its strongest effort yet to gain pricing power of the metal.
The move, which brings the number of firms allowed to import gold into China to 15, comes ahead of the launch in September of a new international bullion exchange in Shanghai with which China hopes to become a price-discovery centre.
China and other Asian gold trading centres such as Singapore are calling for more localised pricing of the precious metal as they seek alternatives to the so-called London fix, the global benchmark for spot gold prices, which is being investigated by regulators on suspicion that it may have been manipulated.
Standard Chartered (STAN.L), Shanghai Pudong Development Bank (600000.SS) and China Merchants Bank (600036.SS) were given regulatory approval recently to import gold, five sources with direct knowledge of the matter told Reuters.
China approached foreign banks, gold producers and refiners to participate in SGE's international bourse, sources told Reuters earlier in the year, to boost its position as a price-discovery centre for gold. It plans to launch three physically-backed gold contracts.
The chairman of the exchange said in June that China should have its own pricing benchmark as it is the biggest consumer and producer of gold.
Conclusion
Chinese gold demand has fallen from record levels in recent months. this was to be expected given the huge leap in demand seen in recent years. Nothing moves in a straight line and a fall was inevitable and reflects the natural ebb and flow of demand, one would expect.
However, an important fact, not realised by most market participants, is that the people of China were banned from owning gold bullion by Chairman Mao in 1950. This means that the per capita consumption of over 1.3 billion people is rising from a miniscule base. This suggests that demand will consolidate at these levels and could again return to record levels - particularly if there are losses in the Chinese property market or stock markets.
This prohibition continued until 2003 when the Chinese gold market was first liberalised and China made its first steps to becoming a global gold hub to rival New York or London.
Since the market in China was liberalised, gold in yuan terms has risen by more than 250% while the stock market has performed poorly.
Even after the significant increase in demand seen in recent years - Chinese per capita gold ownership remains well below that of the levels seen in India and other Asian countries and indeed below levels seen in more affluent Hong Kong.
Culturally, India is known to have the greatest affinity for gold in the world. China had a similar cultural affinity prior to the "cultural revolution" and in time its levels of gold ownership will likely rival those seen in India, Vietnam and other Asian countries.
Within the lifetime of many Chinese people living today is the experience of hyperinflation as many middle aged and elderly Chinese people experienced hyperinflation in 1949.
Therefore, as in Germany, there is a greater awareness of what inevitably happens when a central bank debases the paper currency.
Many market participants and non gold and silver experts tend to focus on the daily fluctuations and “noise” of the market and not see the “big picture” or major change in the fundamental supply and demand situation in the gold and silver bullion markets.
This is particularly due to investment, store of wealth and central bank demand from China and the rest of an increasingly affluent Asia.
Gold Bust (2.8 Kilogramme) of Deng Xiaoping (Reuters/Bobby Yip)
It is worth noting that the People’s Bank of China’s official gold reserves are very small when compared to those of the U.S. and indebted European nations. They are miniscule when compared with China’s massive foreign exchange reserves of more than $3 trillion.
The People’s Bank of China is continuing to quietly accumulate gold bullion reserves. As was the case previously, they will not announce their gold bullion purchases to the market in order to ensure they accumulate sizeable reserves at more competitive prices. They also do not wish to create a flight from the dollar – thereby devaluing their sizeable dollar reserves.
Expect an announcement from the PBOC, sometime later this year or in 2015, that they have trebled or even quadrupled their reserves to over 3,000 or 4,000 tonnes.
Source: China Becoming Global Gold Hub And Gold Price Discovery Centre
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One step at a time. First the London silver fix, now the shanghai exchange, then the gold fix, then the Singapore exchange, the dubai exchange etc. The world is dumping dollars at a very rapid rate. Putin announced in Crimea that its time to dump the dollar as a reserve currency. Now they are going to settle the Ukraine situation without the US involved. The clock is ticking on the dollar . Be patient.
Are they going to trade it in USD or in Yuan?
Gold is not allowed to leave China. It seems to be a govt policy. How can they possibly have a free market based in Shanghai if this is true?
Not sure how they can let gold price be discovered simply by pricing it in RMB. As long as the physical metal is being delivered on the other exchanges the RMB equivalent cannot be any higher on the Shanghai Exchange or there will be no contracts entered into at the higher price. If the other exchanges fail to deliver physical metal and Shanghai exchange is the only one continuing to deliver it, price will be naturally discovered on the Shanghai exchange whatever the currency it is priced in.
But if China expects a dollar crash and a subsequent unpegging of the CNY from USD, it makes perfect sense to have an exchange where gold is priced in a different currency than the one expected to crash.
"official gold reserves are very small when compared to those of the U.S. and indebted European nations"
officially china has little gold and the ussa has a lot of it.
officially. lmao
Did we not just read that the Yuan was 20% overvalued?
Makes gold/yuan trade a bit more difficult.
Will they take the paper price convert it to yuan minus 20% then call it fair price? Maybe they will say gold is $15,000 USD an ounce and you cant afford to buy it. You could send your stack there and get $15000 in Yuan ( X6 fixed to USD). Better check but your bank will not hold Yuan. So your back to USD you dont trust.
Will they hold the gold for you or ship it to you?
Someone in China will have to take your USD in trade for his good Yuan first, why would he do that? What trade partner with CHINA wants USD? Did they not just stop all that?
You read it? You read that the Yuan was 20% overvalued. Wonderful; so now you know all about it. Your babbling is on the level of a Kindergarten student.
Jack lew's worst nightmare 8.19.2014 here at ZH for 20%
This article says the Chinese will invest in gold after losses in houseing and the stock market. So once they have no money they buy gold.
I am old enough to remember the communist party claiming more food, machinery, trains on and on produced right up till they collapsed. So we have more gold? Ya ok.
I think because you don't know how money, bonds or world trade is balanced your view is going to hurt you. Because you are not only wrong you are fractally wrong...wrong at every conceivable scale.
Continue to finger paint in gold at your own risk.
I'm looking to buy a few more bars of silver or gold while its still low (on credit payable same as cash by next year) because I anticipate shtf by October when QE "officially" ends. I figure I can pay it back and make a profit since we are close to the end (since no one knows when shtf will occur). Any advice? Thanks!
Last time tshtf oil and metals tanked because everyone who borrowed to get rich had to sell.
Buy a bag of used US 90% silver coins; look it up on Google; and plan on holding on to it a little bit longer. You'll be glad you did.
What advice do you expect? Go and buy silver 1oz and gold 1/10, 1/4 or 1/2 coins. That's it.
In China a person can go to the local shop and buy bullion without identifying themselves. Later that individual can go sell, again without identification and keep the gains. No taxes are owed. If i purchase or sell here in the USSA i must have valid id. and report my capital gains which will be taxed at the collectibles rate of 28%. The shops must follow stringent reporting requirements and keep accurate records to ensure compliance with the Ferderal Reserves strong arm guys (IRS). America Fuck Yeah
Educate yourself
http://www.jmbullion.com/reportable-bullion-transactions-infographic/
Instead of whinning do your homework; there's always a way.
bullionvault.com. google it and read the website info. carefully. you can send money there, that just disappears. it must be linked to a non-interest bearing checking account, (only); in the US. thiese accounts have no reporting requirement; because they don't generate interest. The method you're interested in is a check sent to B of A's international settlements office in florida; they'll gibve you the address on the website. this will show up as a us check negotiated in the US; then all trace of it vanishes.
Those Sunshine 1oz gold bars are so puuurdy! Gimme gimme.
And Sunshine 10oz silver bars izz real purdy too!
(I'm just talking like a bonehead ditz to satisfy all the PM skeptics who don't have a stinking clue what's coming)
Let'em keep buying stocks and leave the PMs to those who understand the value.
FTA: "[China]...has the largest economy in the world."
Is that a fact?
So who comes next on that chart, Satoshi?
All crytpocurrencies.
If the Shanghai market actually started to reflect a real market value for gold, EU and US citizens would be prohibited from participating. There will be an official exchange rate for EU and US citizens.
You will be allowed to complain about the situation as much as you like. Just don't take your complaints to the street. OK?
Silver and Gold need to be traded among Citizens, when it becomes Liquid and fluid and usable among citizens ( think no tax, no trail ) it's value will become more apparent. Keeping it in a box does not help raise it's usefulness and real value
Keeping it in a box; also known as a savings account; is not intended to "raise it's real value"; which would require "magic". Magic is in very short supply. It is internded that it should maintain it's value while the fiat currencies devalue.
if you study how it worked before the current bastard fiat regime you will understand how it operated. We are not talking about the so called Bretton woods standard, we are talking about the gold standard that was not invented by from idiots in the central banks. It just appeared on the scene over centuries of development. Obviously we are not moving into the old gold system, but a modernized version (whatever that means is up to the BRICS and Associates who will clearly dictate the architecture moving forward). The only reasonn it is kept in a box is due to its marginalization by the banking cabal (planned for over a century).
Who cares about global gold hub in China? Buy physical locally for the fiat shit.
you will care becoz currently its denominated in USD and when shtf, the price setting mechanism will clearly shift east and then you will be price out of the PM period due to worthless dollars.
The Global Gold Hub under construction in China is important; it's a significant article. Because; why? why are they going to this trouble? Also, the article quotes the usual mainstream numbers for China's "gold reserves"; we know these are false. they have several times this much and are accumulating rapidly.
That might be true in 10-15 years but right now, it makes sense to buy gold using the soon-to-be-worthless US dollars. So the guy does have a point. The problem is that it's not easy to buy physical gold in the US and one has to think about storing the gold OUTSIDE the US so as to guard against potential (and likely) confiscation by the government, like in 1933.
I'm in the pawn business and I'll sell you all the scrap gold you want at 10% above market price that day. Cash only bitches... No receipt!!
Always store your physical assets in another country' this is basic. Forget about the plastic pipe in the garden.
Your gold will miss you as you shine shoes in Fema Camp 7.
This story gets me about as excited as the end of the silver fix the other day.
only an idiot would think the ending of the silver fix to a new fix would make any difference.
This is an entirely different animal. Seems like you are falling asleep at the switch.
Sorry, but a true idiot thinks this will be different than any other scenario. If you think the tentacles don't reach to Shanghai then your switch never worked friend.
"There is a difference when one trades paper "WEST" and one trades physical "EAST""
Imho that's the plan : the Chinese/Russians/Indians will have one price, the US/UK mafia, another one.
As the CRI price will be higher than the one rigged by the mafia, most of, if not all, precious metal will move from the West to the East.
Think of a silver/gold vacuum cleaner.
BUT WE WON'T GIVE A SHIT : we'll still have the USD the Euro and the Brit Pound to protect us! (sarc)
It is worth noting that the People’s Bank of China’s official gold reserves are very small when compared to those of the U.S. and indebted European nations.
I don't believe this statement considering how Ft. Knox hasn't been audited since 1953...
Price Discovery, the other RELIC.
How can there be "price discovery" in Yuan, when
it doesn't exist FOR Yuan?
As the yuan is pegged to the dollar, it will be de facto gold price discovery in dollars.
Which is undoubtedly exactly what the Chinese want.
you are joking right? hahaha. COMEX/LBMA will have the rug pulled pretty soon and they will try to settle for fiat, but the big dogs will make sure they are called out for the ponzi scheme they are.
Yuan Gold Trade via the FTZ etc are well on their way.
Silver demand in China is still at all time highs. Silver is prices very low right now and its a great time to buy.
Is that you Eric King?
Assuming that China has a relatively large gold supply would not their gold valuation and gold trade based upon said valuation have an immediate impact upon US$ valuation?
when it shifts the $$$ in hand will be worth shite. Which equates to whatever you decide to buy will cost a whole lot more. May even get to a point where poeple simply don't want it due to the lose of purchasing power. Its coming home to roost this time. Why, becoz the big boyz are pulling the rug and not the hedgies. Sovereigns have so much more clout and muscle in these types of event. We are talking about future survival and prosperity for the east, hence this event is going to play out.
Cash is still king in America, you can't buy bread and milk with Renimbi or Rubles in mainland America. Gold and silver will be too valuable to cash in eh?
90% Silver Junk Coins; still available, amazingly; because not enough people do their homework. Silver Dimes and Quarters will be highly negotiable.
I already have agreements in place to buy both Diesel Fuel and Lubricating Oil with Silver Quarters; with individuals who can sell these commodities. regardless of any regulation.
Until I see the shanghai exchange impact the price of silver, I cannot be too optimistic about gold. The price is the price the holders of paper metal determine
Be patient Chipmunk; history is on your side. Rome wasn't built in a day;' nor did it fall in a day.
The paper Gold market could be crushed in an instant. Any large scale trade for Physical would do it. Russia demands physical Gold from Europe for Nat. Gas, perhaps?