More Dollar Troubles…Shanghai Gold Exchange Launching International Bullion Exchange In Yuan Next Month

Greetings,

(Hiram’s notes: This is yet another strategic move being made by China in its effort to bring down the dollar and push the American empire into insolvency without firing a shot!)

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……..MORE HERE

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