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China Challenges Gold Price-Setting Regime; Confirms Launch Of Yuan-Denominated Fix
“They want to be on the top table in all areas of international trade and this is no different,” Sharps Pixley CEO told Bloomberg earlier this month, tying China’s move to participate in the twice-daily auction that determines London gold prices to Beijing’s efforts to embed the yuan more deeply in international investment and trade.
As a reminder, the auction has its roots in efforts to deter manipulation. Here’s what we said last month:
A long time ago, in a financial galaxy far, far away, a “fringe” blog raised the topic of gold market manipulation during the London AM fix. Several years later (which, incidentally, is about average in terms of the lag time between when something is actually going on and when the mainstream financial media finally figures it out and reports on it), it was revealed that in fact, shenanigans were likely afoot and indeed, regulators are still trying to sort out what happened. The ‘fix’ for the ‘fixed’ gold fix (only in the world of corrupt high finance is such a hilariously absurd passage possible) is supposedly a new system whereby the fixings are derived electronically.
On June 16, the LBMA announced that Bank of China would become the first Chinese bank to participate. Earlier this week, ICBC said it may also join the electronic auction process. From the press release introducing Bank of China's participation:
"We are proud to become the first Chinese and Asian bank to participate in the gold auction.” said Yu SUN, General Manager, Bank of China London Branch & CEO, Bank of China (UK) Limited. “Bank of China joined LBMA as an initial member in 1987, and has been actively participating in the gold trading business in London for over forty years. Although being the world’s largest gold producer and consumer, China has never played a major role in the global gold fixing. Bank of China’s direct participation in the IBA gold auction will reinforce the connection between the Chinese domestic market and overseas markets, make the international gold price better reflect the supply and demand in China, and help to promote the internationalization of the Chinese gold market.”
“We are delighted to welcome Bank of China to the gold auction,” said Finbarr Hutcheson, President, ICE Benchmark Administration. “The growth in daily volumes coupled with the increase in participation from around the globe, demonstrates strong market support for the independent governance and oversight we have implemented to bring transparency and trust to the gold auction.”
“Participation in the gold auction will increase the link between China and international markets, and make the gold price better reflect the nation’s supply and demand,” Bank of China said, while on Thursday, ICBC’s general manager of precious metals Zhou Ming told an audience in Shanghai that “Chinese banks want to expand [their] reputation and brand influence in the Western market.”
Indeed, China isn’t stopping with the LBMA when it comes to increasing its influence on gold pricing. As tipped here last month, the country is set to launch a yuan-denominated gold fix later this year. Now, we have the first public confirmation from the Shanghai Gold Exchange that the fix will be introduced by the end of 2015. Reuters has the story:
"We will be introducing a renminbi-denominated fix at the right moment, we are hoping to introduce by the end of the year," Shen Gang, SGE's vice president, said at the LBMA Bullion Market Forum in Shanghai on Thursday.
"We have policy support for development (of the gold market)," she added.
While Shen did not give more details, sources familiar with the matter have said that China is expected to receive central bank approval for the fix soon.
Pan Gongsheng, a deputy governor of the People's Bank of China (PBOC), said the central bank would continue to support "speedy and healthy growth of the China gold market" and its internationalization.
Given its leading role in gold, China feels it is entitled to be a price-setter for bullion and is asserting itself at a time when the global benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation.
If the yuan fix takes off, China could compel local buyers and foreign suppliers to pay the domestic yuan price, making the dollar-denominated London fix less relevant in the world's biggest bullion market.
While details of the fix are yet to be revealed, sources say it would be derived from a contract traded on the bourse for a few minutes, with the SGE acting as the central counterparty. That could make the process transparent - addressing one of the big concerns about the London fix.
The yuan fix is the most recent effort by SGE to boost China's position in the global gold market. The exchange opened an international bourse in September 2014, allowing foreigners to trade yuan-denominated contracts for the first time.
Between Chinese banks' participation in the London auction and the advent of the yuan fix, China is now in a position not only to exert its influence on the dollar-denominated benchmark, but to establish its own price setting mechanism that may well serve to challenge and ultimately supplant the Western fix which the market will likely always view as subject to manipulation.
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He certainly proved that it was true for himself.
Land Use Rights? Private ownership of land is not possible in China.
Land Use Rights and Land Use System Although private ownership of land is not possible in China, under the Constitution’s Amendment Act of 1988, land use rights become divisible from land ownership, thus making it is possible for the land use rights to be privatized. China has adopted a system of registering both land use rights as well as ownership of property. Applications for registration must be submitted to land and housing administration departments of local government bodies. Upon verification, certificates are issued by the government body at the corresponding level.
In addition, the State Administration of Land has recently issued a circular on Implementation of the Administration of Urban Property Law by Improving Land Registration, which specifies that registration should be applied for in the following situations:
1. Pre-sale of commercial premises
2. Granting of a lease
3. Change of land conditions
4. Obtaining land use rights by way of granting or allocation and building
of houses on the land for real estate development
5. Mortgage of real estate
Well I'm kind of a wimp in Investments. I know people that did invest in China. It must be that in 3rd World Countries you have low investment, low overhead, low cost for facilities,... all these low costs must be maintained despite the progress of Inflation.
I'm sure they will fix it alright. Fix it but good.
99 Comments Blown away!
Here is 100th Comment.
Term Limits for Lawyers, don't let them make a lifetime of destroying the US Constitution and Federal Laws!!
Boom!!
Other than accretive CAM making all metals easy to hoard, with no constraints, what do you think gold means? Today?
Gold is everything, especially today.
Will + lead beats gold. Every time. 4rth turning? Bullshit. thats a psyop. 4rth call to cower, if you're the cowering type.
The federal land is the District of Columbia. That is all. The "federal parks" are State property because no State has ever ceded these lands to the federal government. The anglo-espionage infiltrators merely pledged these State properties to the British Crown, in exchange for a good time had by a few faggot child molesters.
This is just beginning to get interesting.
I dont think China have interest to bump the prices already by now. They are still accumulating and at very low % to their monetary base. Thus, I think they will cooperate with the west and suppress the prices while continuing to hoard.
"A long time ago, in a financial galaxy far, far away, a “fringe” blog
GATA = http://www.gata.org/
fixed it for you, ZH
long before you were born.
The US has the police state and playing world police (with wide military bases, CIA, NSA spying etc).China has a kill switch to the payment $y$tem of $aid "individual$". A game of GIANT chicken.
Keynesians and Friedmanites alike maintained that the gold bugs were dinosaurs. Whereas Mises and his followers held that gold was giving backing to paper money, both the Keynesian and Friedmanite wings of the Establishment maintained precisely the opposite: that it was sound and solid dollars that were giving value to gold. Gold, both groups asserted, was now worthless as a monetary metal. Cut dollars loose from their artificial connection to gold, they chorused in unison, and we will see that gold will fall to its non-monetary value, then estimated at approximately $6 an ounce.
There can be no genuine laboratory experiments in human affairs, but we came as close as we ever will in 1968, and still more definitively in 1971. Here were two firm and opposing sets of predictions: the Misesians, who stated that if the dollar and gold were cut loose, the price of gold in ever-more inflated dollars would zoom upward; and the massed economic Establishment, from Friedman to Samuelson, and even including such ex-Misesians as Fritz Machlup, maintaining that the price of gold would, if cut free, plummet from $35 to $6 an ounce.
What then of the laboratory experiment? Flouting all the predictions of the economic Establishment, there was no contest as between themselves and the Misesians: not once did the price of gold on the free market fall below $35. Indeed it kept rising steadily, and after 1971 it vaulted upward, far beyond the once seemingly absurdly high price of $70 an ounce.[3] Here was a clear-cut case where the Misesian forecasts were proven gloriously and spectacularly correct, while the Keynesian and Friedmanite predictions proved to be spectacularly wrong. What, it might well be asked, was the reaction of the Establishment, all allegedly devoted to the view that “science is prediction,” and of Milton Friedman, who likes to denounce Austrians for supposedly failing empirical tests? Did he or they, graciously acknowledge their error and hail Mises and his followers for being right? To ask that question is to answer it. To paraphrase Mencken, that sort of thing will happen the Saturday before the Tuesday before the Resurrection Morn.
The case for a 100% gold dollar- Murray N. Rothbard https://mises.org/library/case-100-percent-gold-dollar-0
Of course, this news means gold price goes down. Not that I'm complaining, I want to buy more.
I don't think this is so nefarious nor do I see immediate, catastophic fall-out. The Chinese want more ground floor level operational independence. As in, NOT dependent on worn out corrupted New York and London apparatuses. Their own trading currency. Their own exchanges. They are patient and cunning. Most likely this is just a way to facilitate what they have been doing for some years - stacking phys in place of foreign reserves. Maybe attracting more of the actual supply to route through their own exchange, facilitating quicker delivery, leaving NY and London to their paper settled shananigans. Trust them to continue to hoard but in a way that does not disturb the markets. Speaking of markets, they still need lots of healthy buyers in the West, for years to come.
Note to self - buy.a bit more for my own account. PMs are far from obsolete.
Again, what exactly is the motivation of the chinese to act in any way different than the western Banksters re gold?
Exactly. I've heard Rickards and others describe China's goal as being primarily to have the yuan be accepted into a BASKET OF FIAT CURRENCIES used to define the digtial SDR (or whatever comes next). Gold can go many ways from here. I think Rickards said it's mostly just a hedge for China's huge exposure to USD holdings.
Great articles and coverage from the Hedge, per usual.
Sadly, lead may become even more precious than gold.
Damnit!!!! Someone please punch China in the face! If gold starts moving up then silver is going to tag along for the ride and I have not reached my stacking target. I need just a little more time to reach 4200 ounces. Slow it down bitchez!!!
Wonder how this development meshes with the several newly launched Chinese gold bullion funds??? Several of them have very low initial investment requirements so they have mass appeal.
These funds are sure to attract a great deal of capital IF the price of gold begins to advance...and IF that begins, more capital will be attracted, etc.
One small step for man....one giant leap forward for WWIII