China Launches Yuan Gold Fix To "Exert More Control Over Price Of Gold"

Tyler Durden's picture

Overnight a historic event took place when China, the world's top gold consumer, launched a yuan-denominated gold benchmark as had been previewed here previously, in what Reuters dubbed "an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market." Considering the now officially-confirmed rigging of the gold and silver fix courtesy of last week's Deutsche Bank settlement, this is hardly bad news and may finally lead to some rigging cartel and central bank-free price discovery. Or it may not, because China would enjoy nothing more than continuing to accumulate gold at lower prices.

The first Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan ($39.69) per gram on Tuesday, equivalent to $1,234.50/ounce.

China's gold benchmark is the culmination of efforts by China over the last few years to reform its domestic gold market in a bid to have a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is currently set. As is well known, as the world's top producer, importer and consumer of gold, China has balked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.

The new benchmark may not be an immediate threat to London, but industry players say over time China could set the price of the metal, especially if the yuan become fully convertible.

Cited by Reuters, Pan Gongsheng, deputy governor of the People's Bank of China which has been disclosing gold purchases every month since last summer, said that "the Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price ... will help improve yuan pricing mechanism and promote internationalization of the Chinese gold market."

The mechanics of the Shanghai fix are comparable to those of London: the benchmark price will be set twice a day based on a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform with 12 participants.

The 18 trading members in the yuan price-setting process includes China's big four state-owned banks, foreign banks Standard Chartered and ANZ, the world's top jewelry retailer Chow Tai Fook and two of China's top gold miners.

When discussing the Chinese gold fix previously, World Gold Council CEO Aram Shishmanian said that "it is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East."

"As the market expands to reflect the growing interest in gold by Chinese consumers, so too will China's influence increase on the global gold market."

It may already be working: according to Reuters, one reason for today's spike in silver is due to "heavy buying of silver in Shanghai, and that has triggered buying in gold as well," said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Finally, when Chinese capital capital flight into Canadian real estate and offshore tax havens is curbed, we expected that gold could well follow the path of bitcoin, which has doubled since our article presenting it as an attractive alternative to avoiding Chinese capital controls.

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nuubee's picture

Now the real currency war begins.

Latina Lover's picture

Exactly.  Notice how the London Satanists inaugurated their Temple of Baal Arch on the same day?  Perhaps they plan to sacrifice some of their minions responsible for the Gold manipulations, to cover up their crimes?  Just saying.

MillionDollarBonus_'s picture

The whole distinction between 'physical' gold and paper contracts is meaningless. It is common knowledge that the number of contracts traded exceeds the amount of gold backing them. This is because most people want cash settlement - they don't want the hassle and cost of taking delivery of physical metal. The current price of gold has already taken this information into account, and it's been falling for the last five years.

WHY WE NEED TO LOWER THE VOTING AGE

back to basics's picture

From one bank controlled rigged market to another bank controlled rigged market.

Yeah, as a gold bull, I've been holding my breath for this one ///s

tmosley's picture

I don't think China would be happy to continue accumulating gold at low prices, as their system has been stressed to the verge of collapse. The new system will be far more stable, and they needed to switch to it soon.

Xi Jinping will be remembered in China like DeGaulle is remembered in France.

BaBaBouy's picture

Warning... GOLD Heavy resistance between $2250 and $2300.

kliguy38's picture

heaviest resistance at 10,000

J S Bach's picture

If this is legit... expect the price (in fiat dollars) to slowly but surely creep upward.  Not in a direct line, but far more of an incline than the usurers have fraudulently disallowed up to this point.

Manthong's picture

WHY WE NEED TO LOWER THE VOTING AGE”

https://www.youtube.com/watch?v=hmeTftBlOVY

nope-1004's picture

“The Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price … will help improve yuan pricing mechanism and promote internationalisation of the Chinese gold market,” Pan Gongsheng, deputy governor of the People’s Bank of China said at the launch in Shanghai.

 

Promote internationalisation is an interesting phrase.  Gold hoarders, as they are often called by fiat whores, shouldn't have an eye for internationalisation in theory, unless they have an international plan.  These two words, imo, are huge.

 

Pinto Currency's picture

 

 

Not so much about China as it is the destruction of the LBMA paper pricing structure by pricing gold with actual metal trading:

http://www.safehaven.com/article/41072/moving-to-the-post-lbma-era-gold-price-reset-watch-out

Manthong's picture

..gotta wipe out the Comex and paper metal ETF’s first.

 

..and

WHY WE NEED TO LOWER THE VOTING AGE”

WTF.. what this country needs is even more ill-informed, indoctrinated, socialist planet rangers helping to install bought-and-paid-for politicians..

BaBaBouy's picture

""Overnight a historic event took place when China, the world's top gold consumer, launched a yuan-denominated gold benchmark""

WOW ... Interesting ... Today we have the largest move in AU / AG in a long time...

beemasters's picture

Can someone please explain in plain simple logic how this would be a game changer? I'm not embarrassed to say I don't understand the mechanics behind the price fixing if China steps in.

Muh Raf's picture

How this would be a game changer? or "boost its influence in the global bullion market" - simple answer it's not a game changer or significant booster, that's hype. There's already 3 major Chinese players in the London IBA price (post LBMA fix that was disbanded a year ago for all those 'finger on the pulse' types here at ZH) and who are central to the new Shanghai fix, so don't expect much variation or the newly hoped for alternative price discovery waffled on about in this article.

 

Edit: Damn! Can't switch this bold type off

balanced's picture

The claims are that, as all SGE transactions must be settled in physical, it will make the naked shorting of gold paper as is done on the CME more costly and easier to arbritrage (paper vs physical). So when the bullion banks dump billions in paper onto the CME in order to lower the price, the actual physical market (the SGE) won't follow suite, as nobody would actually let go of that much physical for such ridiculous prices. I don't claim to know whether or not this will actually be the case.

tmosley's picture

You are exactly correct.

This removes the paper leverage the cartel has been able to employ until now. Now if they want to push the price lower, they have to produce a large percentage of the metal (if not all of it, depending on how efficiently the arb is exploited) vs before when they needed way under 1% if any at all (forced settling of contracts for cash or GLD shares).

Everyone saying this isn't a big deal either knows a lot less than me, or a lot more. I suspect it is the former, but acknowledge the possibility of the latter.

bobsmith5's picture

MDB is scientifically trained to arouse extreme anger in those who read his utter crap.  He is basking in the knowledge that he can get 80 down votes with just a few insane comments to an article.  Can a mind really be as diabolical as MDB's?  Is he so delusional that he really thinks his ideas are so right that he laughs at the idiots he angers with them? 

The mysterious MDB, nobody really knows what he is doing here or what he really thinks.  Do you people think he created that stupid website if it's all sarcasm and satire?  What really does MDB get out of commenting on Zero Hedge?  Infamy, hate, attention, a way to promote his website, wants to change minds to his political economic philosophy, enjoyment in the anger of others, or all of the above?

orez65's picture

That MDB fu.ker really knows how to pull my chain!

Congratulations you fu.king shit head ass hole!!

nink's picture

And I don't think for a second China will start watering down (err creating derivatives on derivates) for  their new gold yuan. 

In 10 years time it will be about as worthless as the rest of the gold paper out their including bitgold

bonderøven-farm ass's picture

Interesting.....price fix at 1234.5(0)

Any ZH Eastern occult Numerologists care to opine on this combination?

Lurk Skywatcher's picture

Its what happens after the countdown to launch - the mission control clock starts counting up

Squid-puppets a-go-go's picture

I just got off the phone with my australian bullion dealer and asked if they had any plans to switch their pricing to that of the SGE. They said no we're sticking with LBMA fix as a guide. I said what if SGE stars offering a serious premium? They said no change. I said 'I have a trusting relationshp with you guys. If i want to sell at the price the physical market is offering , id regard it as safer and more convenient to sell to you guys rather than find some chinese buyer i dont have an established relationship with. They said its immaterial to teir business model.

FOLKS, dont presume your dealers know the implications of this market shift. Get on the phone to them 

neidermeyer's picture

I noticed that cutesy move too... What surprises me is that they didn't manage to put some "8"s into it ... maybe 1,234.88??

beemasters's picture

I would like to know how the system actually works and will work with China in the scene. From what we've been told so far, a few bankers fix the prices of the metals everyday...thus the manipulation. Will there be a few chairs now reserved for China??? Seems unlikely.

What does Yuan Gold fix actually do to the cartel? Will there be a huge disparity between Chinese and London pricing? Who gets to dictate the final figure and how is that worked out?

Squid-puppets a-go-go's picture

what it means is that china now has the ablity to set a price fix a little higher (no need for a huge disparity) than what LBMA or Comex are fixing the price at. This means western investors can make more $ selling their gold to shanghai than if they sell it to the west. This accelerates the shift of physical gold to the east, by arbitrage, and if the West doesnt want its coffers totally emptied it has to match or better the price china are offering. 

It means, in earnest, the end of the period where the west can suppress the price of gold with gimmicks. It means the start of gold price catching up to the money supply increase from the QE era. It means china are done accumulating gold on the sly and are moving to demand their day in the sun

It means that both china and the west now have their finger on the tape player and can stop the music, so mak sure you have a chair to sit on because its no longer only at the Wests time of choosing

'who gets to dictate the final figure' - there are henceforth two 'final figures' - you as the investor choose your market to buy and sell

Nage42's picture

Makes for another currency liquidity market for Russia too, so that it's not only China that has to broker Russian commerce into the world trade once the embargos/tarrifs start rolling in for-realsies.  This would be assuming that Russia wants to sell more Au/Ag/Pt/Pd than China wants to buy direct... which I think will be after they've accrued >>8,100 tones of Au.

Also, sets up a nice release pressure valve for if/when they float the Yuan and need to possibly use Au reserves to make adjustements to the Yaun free-float (defend it's value relative to Au, rather than $/euro/yen/pound).

beemasters's picture

What's stopping other entities...like Sprott to set up a Canada Gold Exchange? It sounds like the more Gold Exchanges are set up, the less monopoly of the price there would be. Is it that simple to break the manipulation?

Squid-puppets a-go-go's picture

well, yes, certainly the more diversification, the freer the market. I think the only thing stopping other entities is the logistics of managing large enough volumes

certainly the mining sector has really dragged its feet over the last few years suffering prices under or at cost price despite greater demand for their product - they could well have established alternatives or withheld supply from the market (only they were foolish enough to make themselves debt slaves like every other corporate entity, thus divesting themselves of their power and discretion). Perhaps many of the miners ARE lending their support to the shanghai initiative

Theosebes Goodfellow's picture

Don't lok now, but the prices be poppin' this AM. Gold around $1255, silver climbed over $17, (but has since dropped 12 cents). Is this the new "Shanghai Swing"? Long popcorn and easy chairs.

Mountainview's picture

Hungary issues a Yuan denominated bond...Saudis silence US on 9/11 finance....all signs of a fundamental change.

Took Red Pill's picture

""Overnight a historic event took place when China, the world's top gold consumer, launched a yuan-denominated gold benchmark"" and you can bet it won't be on the evening news.

Cloud9.5's picture

Children feel rather than think.  That is why they embrace liberalism, a notion predicated on the assumption that there is enough if it were just adequately distributed.  As they grow older  a few will watch Animal Farm and understand it.

Katos's picture

We've had enough to spend about 20 Trillion dollars since 911? What do you think we could have bought with that money if it hadn't been wasted on pointless wars? We always have enough for whatever the establishment elites decide they want, so why not enough for the rest of us?

DanDaley's picture

"Children feel rather than think."

 

Anybody who has ever had teenage kids know exactly what you mean...there are exceptions, but very few.

 

If you're not a liberal at 20, you have no heart, and if you're not a conservative at 40 you have no head. -Benjamin Disreli

New World Chaos's picture

Ditto for women.  Giving them the vote was one of the most brilliant things the puppetmasters did.  For the smart women out there:  Would you give up your own vote in order to take it from the 90% of women who can't think two moves ahead?

I would give up my own vote in order to restrict voting to landowners who served in the military and earn enough to be a net tax donkey.  Govt. benefits, govt. employment (besides military), and employment by govt. contractors / corporate welfare queens would count against taxes.

TPTB would love it if we lowered the voting age to six.  Bozo the Clown could say "Hey Kids, vote for OBozo for free lollipops and a lifetime of recess.  It's fun and cool.  And if you don't, you are very, very bad and Santa will stay home forever".

Reminds me of the mainstream media.

Ghordius's picture

"Children feel rather than think.  That is why they embrace liberalism..."

funny. and OT. and, again, I can't resist

what you call "liberalism" is an exceptionalist US distortion used by millions of Americans that makes billions of non-Americans dizzy, and go: "Eh? What?"

there are three main branches of ideology as understood by Old Worlders: Socialism, Conservatism and (Classic) Liberalism. Wikipedia, btw, uses all those terms in the Old World Sense, i.e. in the "commonly accepted way". Some think that the American "Twist" is due to specific propaganda so to make Americans less likely to become ideological, others point out that a party duopoly makes a hash out of it for much simpler reasons: "it's all the same, really"... because it is, in the US

so your (funny) statement would have to read like this:

"Children feel rather then think. That's why they embrace Socialism. A notion predicated on the assumption that there is enough... if it were just adequately distributed"

Actually, I sometimes think that the more apt way to describe S, C and L is a different one

Socialism is... Adult Female. Motherly. Mothers practice Communism with their babies. They literally give nearly everything to them. Later, they wean them to Socialism, and afterwards they might push them gently out of the nest... or not. Mother Knows Best, And Gives You What You Really Need. Hush, Dear

Conservativism is... Adult Male. Fatherly. Fathers practice it with their children, try to instil them conservative values based on their aquired wisdom. Some fathers go literally fascist on them. The Conservative Leader is a Father Figure, "Father knows best, don't ask, obey" (as in Communism, though with substantial differences). Note that Fathers are - when wealthy - very keen on... note the word... Patrimony. Literally, "the Father's Heritage". Note the funny contrast to... Matrimony

(Classic) Liberalism is... "the Child's Question": WHY NOT? It is the more modern of the three, and it is based on the assumption that everything ought to be allowed and if not, it ought to be explained why not, and regularly re-explained and re-visited. Note: Up to "Slavery? Why not? Debt Serfdom, Debt Prisons, why not?"

My two cents: All three are correct in their stance. The problem is in excesses of them.

Motherly Socialism is apt to... smother. Fatherly Conservativism is apt to... dictate, period. Classicl Liberalism is apt to lose it's way, moral compass and everything else.

I prefer... Centrism, btw, which is more or less a balance among the three. The Moderate Middle. The Center That Has To Hold.

An example from the world of animals? My favourite is elephants. Females stick together for life, form a "socialistic" group with a Matriarch (look in the middle) and her chosen "successor in leadership" learning to lead the group (look in front, listening thought to Mother's comments and tips). Male elephants go fully individualistic, they don't show any inkling for conservative fatherhood. Human males in prehistoric times had a similar lifestile (think a group of males/hunters instead of one male elephant)... until Father became more important then Mother, the begin of the Age of Patriarchy... and Conservative values. So Socialism was First, Conservativism Second, and Liberalism Third. All other ideologies are mixtures or extremes of this three-colour theme

joe90's picture

Hey, you are supposed to let us know which one you are!  Extrapolating family roles/structure to wider societal structures is a flawed logic.  Steering the "hive" mind has been a science developed by a select few and it uses a dialectic that sees the ideologies you describe as opposing "forces".  Socialism, Conservatism and Liberalism are labels used to rouse the rabble.  Ideally there is only family, friends and a friendly happy hardworking society.  Anything else only serves to drive a wedge between that and you.

Ghordius's picture

and aren't you supposed to read my comment before you reply? and the one to which I replied myself?

humans don't form "hive" groups. that's insects. go back and look at my elephant groups vs elephant individualism example

then go to the Bible, and read how Abraham left behind him a matriarchal/socialistic city life-style for a patriarchal/conservative rural one

"Extrapolating family roles/structure to wider societal structures is a flawed logic"

I could rebuke it's... applied logic. Example: The Roman State was based on the Roman "Familia". Rome was modeled on the Roman household

The Roman Household had walls with a legal meaning, a holy fireplace, rites and traditions. Rome had common walls with a legal meaning, a common holy fireplace and common rites/traditions

"Ideally..." is exactly that: ideally. In practice, humans extrapolate to the whole what they know from their immediate surroundings

Romans did not invent all this. But, interestingly, explained it this way: the "family" (note: a Roman familia can't be compared easily to the modern ones) as a building block to the whole of the State, with the whole replicating the patterns of the building block

king leon's picture

Barry McGuire ,EVE OF Destruction. "Your'e old enough to kill but not for vot'n"/just sayin

h rearden's picture

I used to be a liberal then the suckling stopped and I had to use the "big girls potty"

LawsofPhysics's picture

^^^this.  The chinese invented fiat money for fucks sake.  The PBoC will always want the freedom to devalue their fiat.

tmosley's picture

They invented it, and have reviled it ever since. Only when the idiot communists took over did they go back to it.

Though they seem less stupid now than they were back when they took over.

The Saint's picture
The Saint (not verified) Manthong Apr 19, 2016 11:57 AM

WHY WE NEED TO LOWER THE VOTING AGE”

We already have too many ignorant and uninformed voters.

What we need to do is limit voting to Real Property owners of at least $50,000 in real property.  Responsibility needs to return to voting.

And, Corporatations Are NOT People.  Get them out of politics.

PT's picture

Govt will gladly steal your land so that you can no longer vote.  They might even give the land to someone who will vote for them ... if voting matters ...

Lurk Skywatcher's picture

What about lowering the upper voting age limit. Old people have already had their chance, and only vote to keep or increase their own influence. The youth are the ones who must live into the choices that are made, and so should be more in charge of making those choices. The baby boomers grew up in a world that gave them advantages that they have systematically destroyed for further generations in an effort to retain the benefits of those advantages solely for themselves... and look where we are now.

MayIMommaDogFace2theBananaPatch's picture

What I want to know is "Who is MDB going to vote for in the Presidential election?"

Lea's picture

"What we need to do is limit voting to Real Property owners of at least $50,000 in real property.  Responsibility needs to return to voting."

Yes, great. Like that, someone who will be a perfect moron with an inherited property will vote, whereas the bright child of a poor family won't.
Any more great ideas?

On the other hand, an overall culture test would be a good idea. Know here Iraq is, know where Libya is, know actual people live in these two countries and have an idea of their history, know what islam is (I mean, something more than "islam baaaad, drool"), know what the EU is, know how much is spent annually by the Pentagon, know how much is spent by the US healthcare system to what results, etc = can vote.

Don't know = can't vote.

Quote, "And, Corporations Are NOT People.  Get them out of politics."

There, you are right. Nothing will ever get better as long as that is not achieved.

MayIMommaDogFace2theBananaPatch's picture

+50 thanks for that -- never knew of it before

(spoiler: look for Richard Pryor playing the part of the drummer -- seriously)