Chinese Dominance Extends

There is little denying the long term strategic thinking of the Chinese.  They are the masters of secretly employing long term macro economic strategies toward global dominance.  Listeners to our weekly radio wrap know of their march toward internationalising their Renminbi (Yuan) currency with exchange hubs around the world making it now the 5th most traded in the world after a 345% increase in just under 2 years.  They also announced yesterday they are on track for a September/October start of the China International Payment System (CIPS), similar to the dominant SWIFT system, and another clear move toward challenging the USD.  

Just as important for gold investors is the announcement last week of the replacement to the old (prone to manipulation) London Gold Fix starting 20 March that will see the Shanghai Gold Exchange (SGE) able to influence the spot price.  Currently it is dominated by paper traded COMEX futures where contracts far outweigh the amount of gold backing it up as most are settled in cash or closed out before expiry.  The SGE requires settlement in physical gold and is based in the world’s biggest importer and producer of gold.  The significance of this should not be underestimated but it is not necessarily a panacea for immediate price growth.  Again, the Chinese are strategic and patient.  They may well ‘like’ the price this low for a little longer as they accumulate more gold from the west.  That said, when they are ready they will tell the world just how much they have (1st since 2009) and that would most certainly send the price skyrocketing.  No one knows when this will be and our oft repeated quote is never more relevant when it comes to investing in gold and silver… “better a year too early than a day too late”.