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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Socratic Dog's picture

Sounds good to me Lea....wonder why all the red arrows?  Hedgers against brains and (real) education just like the rest of society?  Hell, don't even call it education, call it awareness.

I never did like the fact that my well-considered, researched vote counted for no more than that of some emotionally-addled boy child, or of a "we exceptional, aren't we?" brainwashed sociopath.  Witness the number of people voting for an Obama, a Bush, for the inevitable outcome.

Mr. Bones's picture

$50,000 in real property

So... 100 acres of Bob's forsaken expanse 100 miles from civilization with no water or mineral rights or 1 square foot of soiled bathroom tile in San Francisco or New York.

No thanks.  I'm sure the central planners appreciate your efforts to further inflate the price of real estate.

GoldMan1988's picture

Lower the dirnking age would add any supplement to the gold crisis at disscussion. You should watch the gold revenue in real-time at GSI Exchange

Keyser's picture

By the fact that silver is up 4.5% this morning, it appears their tactic is working... Off to the races...  

beemasters's picture

It's been awhile since I last saw a dollar move up in silver in a day. Today, it almost happened.

raeb's picture

Pretty meaningless to compare the price of gold in dollars when we know the value of fiat dollars is "0".  When the dollar hits "0" gold hits infinity.

rrrr's picture

For having a body like a woman and face like a bannana?

markettime's picture

Well you have to admit, having the COMEX set the price of gold is kind of like having BestBuy set the price of a flat screen TV even though they don't have any in stock!

Mercuryquicksilver's picture

I'm + gold too, but what people seem to forget, or never knew, is that fiat has its place and gold has always been manipulated by the banks to keep you down. The problem with our fiat is that it is privately and secretly controlled. The Bank of England forced gold upon us because the continental dollar was working too well.

logicalman's picture

Hail the New Fix - same as the 'Old Fix' to paraphrase.

 

coast's picture

you always amuse me MDB.  You are good.  And its funny how some think you are serious and start to debate you.  You should put "sarc" in your postings tho cause some read your posts and it raises their blood pressure.  You are pretty darn good tho at fucking with us all  :-)   lol

RAT005's picture

Nice to see him out on thin ice promoting paper gold is equal to phys.  Helps expose what an ignorant incompetent fraud he is. Just forgot to mention OI to registered gold increased from 20:1 to over 500:1 because heck paper is so popular and common. 

N0TaREALmerican's picture
N0TaREALmerican (not verified) coast Apr 19, 2016 10:46 AM

I agree.   The "we should lower the voting age link" made me laugh.   

logicalman's picture

Lowering the voting age is a great idea, if you want people with no knowledge of history or sense deciding your future.

It's simple.

Voting is a waste of time.

 

Sokhmate's picture

I propose that ZH replaces the down arrow in every single MDB post by another up arrow.

GRDguy's picture

Tell you what; create a billion dollars worth of fake IBM shares and sell them on the market at specific times, then let's see what happens to the price of IBM and the DOW.  Fundamentals would no longer apply to figuring out the price of IBM stock.

bigkahuna's picture

But the SEC would slap him with a fine of about 1/100 of his profits and then they would make him a director - then the payola starts. There is plenty of upside.

MillionDollarBonus_'s picture

That wouldn't affect the price if people were aware that the contracts didn't represent actual shares and that they were likely to be cash settled.

nope-1004's picture

waste of bandwidth

The value of your own time is obviously worth nothing for carefully posting such stupidity.

dark pools of soros's picture

yeah but then you also need to consider the amount of wasted idle time of stackers the past 10 years since they never sold on the peak and scribble their comments here about doomsday 10 hours a day

 

If they are never going to sell, why do they watch the price so closely?

 

 

nope-1004's picture

The past peak you reference was not THE peak, my friend.  It would be foolish to sell a hard asset during a currency crisis, which is why no one has.

Personally, I've watched fiat price of PM's over the years because it showed me how desperate the banking sector really is, how insolvent they are playing the long JPY/short gold paper trade, and how fearful they are of any real public knowledge that the dollar based derivative system is on the brink of implosion.

Hope that answers your question about our failed monetary system.

dark pools of soros's picture

No - you brought up the wasted time of MDB and I showed the higher ratio of wasted time of stackers here.   You have PM blinders on like many stackers.  

If you want to screw over fiat, then just get low interest debt that can be paid off with cheap fiat once it goes to shit.  It is the same value gain as holding onto PMs and you can actually use whatever you grabbed at low rates.

I made gains speculating on PMs and BTC because I sold at recent peaks. I keep a small stack of both currently but I rather wait till the first panic hits and then momentum trade when all the fools that don't have time to watch markets blindly start throwing money around.

I already made enough money to buy me the time to sit and watch these days because I sold before.

Hope you understand what GAINS really means

 

 

nope-1004's picture

The de dollarization of the US dollar continues.  Other nations are dropping the use of the dollar and striking deals between them to trade in local currencies.  China is doing this and has been very progressive over the past few years.

An alternative play to the US dollar and Treasuries is coming.  If you measure your gains in a currency that is being systematically ignored as time goes on, then that is your choice.  Silver is down 60% over the last five years and it brings out all the crazy people pointing out how bad an investment it was, yet oil is down more than 70% over the last 5 years and no one comments.

There is an obvious trend here by US dollar lovers:  Point out that nothing else exists, when it actually does, and comment that PM's are the worst investment, when they actually aren't.

Are they at least paying you good over there?

lol

LawsofPhysics's picture

Allow me to simplify this for everyone;  In the absence of true price discovery, talking about the "price" of anything in fully manipulated fiat currency is fucking moronic...

Trust me, when the public casinos  fold, you want to have preserved your purchasing power and be the owner of productive assets, period...

Quebecguy's picture

YES. The metal has the value today. It's the numbers that lie. When the casino falls (it's making lower highs and lower lows right now) and price discovery/ price is true again, (thanks China) then the number, in whatever currency you want, will reflect the value, the REAL value. This many Franc or whatever. 

 

The one single thumbs down from "SOMEBODY" confirms you are 100% spot on. 

 

Gonna go "take some profits off the table", just because we finally can.

Wavin' four fingers and a thumb to you and yours. 

dark pools of soros's picture

You are putting words in my comments that are not there.  Where do I say I am a dollar lover?  I am talking about locking in gains as a trader. If fiat dies and everything from eggs to scotch goes up with silver and gold then you didn't gain anything except avoided a fiat pothole.

So going back to the chart, if someone bought on the climb to an avg cost of $20 on silver and sold above $40 just for sake of simplicity then that person can now buy double the amount of silver they could of if they just kept buying every month in fear as you stackers say.

Because how can you say $20, $30, $40, $200 is a high price if you religiously believe that fiat will be worthless?  You would be buying everytime you have an extra fiat lying around right?

 

logicalman's picture

If your gains are in worthless fiat, are they really gains?

If your playing a corrupt game keeps the game going is that a good thing?

dark pools of soros's picture

Is it worthless right now?  How are you buying your silver? With Goats?

 

logicalman's picture

You place your bets and hope for the best.

You only find out what you got right when things get really tough.

Don't sound so smug. You don't KNOW you are right, you just believe you are.

 

dark pools of soros's picture

This isn't some holy sanctum website.  Do you trade and make gains or do you sit and wait for some magical reset?  If that reset is the end of the paper manipulation that forces phyz to jump higher, then atleast you have an angle.  If your magical reset is just the end of $$$ then my point above is that you can do the same thing by using current cheap loans that get paid back in peanuts after said reset.

 

Condition 1SQ's picture

You can't really be that dumb and work in finance.  I mean I know there are a lot of waterheads in your line of work but that is colossally stupid.  Tell us then, MDB, when one purchases $1 mil in paper gold, what are they actually purchasing?  It's not $1 mil in gold, based on your reasoning.  So what is it?

logicalman's picture

It's a 'cross my heart hope to die' promise. Worth way more than gold.

Trouble is they never live up to the last part.

 

Anasteus's picture

Just to recall, don't forget to keep on stackin' while you still can, bitchez!

I like the wooden box full of gold bars in the video...

Frankie Carbone's picture

Got Gold, Bitchez?

Whatever happened to those cool Zerohedge mugs? I never managed to get one. 

Bill of Rights's picture

Ahh another DUST holder implodes...

rubiconsolutions's picture

Hey MDB - I'm all for lowering the voting age as long we raise the IQ required to vote. 

Reichstag Fire Dept.'s picture

Million Dollar Bonus_ you ignorant slut.

Can you not see that China is now in a position to collapse the 300x oversold  COMEX paper market by offering legitimate paper contracts denominated in Renminbi?! ...although, why they would want to part with physical at the counterparty's option is pro'ly not going to ever happen.

I would look for China to be the new gold pricing mechanism when the current globally accepted one becomes incapacitated by...oh...say...counterparties trying to collect physical gold when it's over 300x oversold?!

 

Boxed Merlot's picture

why they would want to part with physical at the counterparty's option is pro'ly not going to ever happen...

 

I'll bet you're correct.  Depending on the requesting party, they'll be as good to offer UST's instead.

TeamDepends's picture

This is their big day. Waco, OKC, Columbine would have occurred 4/19 but was postponed a day due to God knows what. Many other big events happened on this day in history. Fasten your searbelts!

conscious being's picture

TeamD - Beltane starts today, but runs for 13 days til May Day. London appearently got their Temple of Baal arch recreated just in time.

New World Chaos's picture

Cue ISIS false flag.  Sacrifice of children by fire.  More police powers.  Then, a crackdown on anyone who is pissed off about the invasion of Europe.  But the spell won't work if the whole Internet is watching...

RaceToTheBottom's picture

Aside from buying gold, driven by their need to get included in the SDR, china has proven to be a very worthy copy of the Western Central Banksters, only with their debt ratcheted proportionately up.

 

I would love to have it play out differently, but I see China being another London in the gold price fixing spectrum...

Max Cynical's picture

The Chinese have NEVER released actual economic indicators.

Why would anyone think the Chinese won't manipulate PM pricing?

The Chinese are as deceptive and dishonest as every other player.

spartan117's picture

Yes, they are.

Until it becomes beneficial for them to disclose  

Pick a weapon, choose a side.  

Ghordius's picture

true
but they absolutely love the shiny, and are the most likely to stage/get a "bank run"-like "gimme the phyz, dammit". so the "game"... might indeed change a bit, nevertheless

Reichstag Fire Dept.'s picture

If the Chinese own more gold than anybody else (a probablility) then it will likely be in their best interests to manipulate the price UP if there is any need to manipulate it at all after a certain point. 

RaceToTheBottom's picture

The same argument could have been applied to the US.

The amount of money in they have gold VS the amount of money that can be printed and then fractionalized means, IN THE SHORT TERM, the chinese can make more money doing exactly what the US has done.

 

When that changes is the question, but right now poeple are still saying the dollar has value....