China Takes Next Steps in Global Gold Strategy

China Takes Next Steps in Global Gold Strategy
Customers look at gold jewellery on display at a shop in Hefei, east China's Anhui province on August 23, 2010. STR/AFP/Getty Images
Valentin Schmid
Updated:

China is the world’s largest producer, consumer, and importer of gold. But that’s not enough. The country is taking steps to become the dominant power in gold trading and lending as well—and it has different reasons for doing so.

A year ago, Epoch Times first reported China’s ambition to take control of physical gold pricing. According to a Reuters report, we are getting closer to the official launch of a yuan-denominated physical price for gold.

“I think what the Chinese are trying to do is creating a real market that reflects supply and demand for physical gold,” said Simon Mikhailovich, managing director at Tocqueville Bullion Reserve last year.

“They are working on building an infrastructure in which the pricing mechanism of gold and silver and other commodities can be transferred from the West to the East,” said Willem Middelkoop, principal at the Commodity Discovery Fund and insider to Communist Party deliberations on gold.

If China launches this new pricing system, it would mark an important next step in China’s quest to dominate world gold markets. It already has a futures exchange with a new standard for 1 kilogram (35.27 ounces) 0.999-purity gold bars. This rivals the New York Comex future exchange, which deals in 100-ounce contracts, and where only 1 in 300 trades actually results in physical delivery, according to Middelkoop.

The fix for physical gold would rival the London Bullion Market Association (LBMA), where a couple of banks set the price in secret twice every trading day, and where rumors of price manipulation abound.

(Trading Economics)
Trading Economics
Valentin Schmid
Valentin Schmid
Author
Valentin Schmid is a former business editor for the Epoch Times. His areas of expertise include global macroeconomic trends and financial markets, China, and Bitcoin. Before joining the paper in 2012, he worked as a portfolio manager for BNP Paribas in Amsterdam, London, Paris, and Hong Kong.
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