Well it's certainly the largest consumer, purchasing 63% of gold in 2013 and given the quantities the Chinese are buying, you could be forgiven for thinking so. Its lust for the yellow metal rose 41% in 2013 with a new record of 1,176 tonnes. They currently mine more gold than anyone else and their production is still increasing! In contrast Australia, Russia and the U.S. have slowed production considerably. Seemingly China is putting gold centre stage to firm up its own currency the Renminbi ("people's currency"), in light of the failing dollar. So could we be looking at a new gold standard?
With the imminent end of the silver 'Fix' in London (14th August), surely the gold 'Fix' will follow a similar fate. It all came into question when two eminent economists wrote a paper accusing the banks (that fix the price in London) of manipulating the 'Fix' in order to profit from it. As we all now know Deutsche Bank was the first to fall and withdrew from the fixing board. Nova Scotia, Société Générale, HSBC Holdings and Barclays are still dangling with more investigations pending by the German regulator BaFin.
Where does this leave everything? Gold would undoubtedly go up without the western bank cartel intervention, by how much is anyone's guess. It does all seem to point to the dollar collapse... because if the Chinese were to back the Yen with gold, it would make it the new world currency. All nations would then pin their currencies on the Renminbi and in so doing displace the dollar. Now there's a thought!
So where could the new Centre for the Global Gold Market be? Well the Chinese are taking steps to see that it ends up in Shanghai. They have been approaching lots of foreign banks and producers of gold to help setup a global exchange in Shanghai. Beijing has already approved the state backed scheme Shanghai Gold Exchange (SGE) to trade in the city.
Some are saying the writing is on the wall; “It is quite clear that the East is trying to dominate the market,” Jessica Fung, of BMO Capital Markets.
The future's bright, could it be gold?
If this has been of any interest or help please share. And as usual your comments are always welcome!