China to dominate gold

The record breaking domestic gold consumption of China of late is well understood but they have not been a large host player in international trade as London and COMEX have and therefore not really a ‘price setter’.  Well that is about to change, and change at a time when there is more and more distrust in the way London and COMEX set those prices.  Well on Thursday the first step in that changing occurred with the Shanghai Gold  Exchange opening the International Board in Shanghai’s Free Trade Zone.  This will see a couple of important things occur.  First we will see China’s physical bullion dominated trade start to properly inform the price discovery and secondly yet another avenue for Yuan exchange not USD.  As Aram Shishmanian, CEO of the World Gold Council, said last week: 

“The growth of the Shanghai Gold Exchange to become the world’s largest physical gold exchange provides compelling evidence that the future for gold is physical.  As the market shifts from west to east, the expansion of strong gold trading hubs in Asia will improve price discovery, liquidity, transparency and efficiency; all of which will transform the landscape of the global gold market. As a major global market, this will enable China to take its rightful place in the world gold market.

The development of the International Board, opening up the Chinese market to global investors is a significant first step towards the internationalisation of China’s gold market which already accounts for 30 per cent of global demand. “