Will China Be the Next Gold Fix?

Will China Be the Next Gold Fix?

(Reuters, 10/21/2014) - The Shanghai Gold Exchange (SGE) is working on plans for China's first forwards and options in gold, sources say, potentially putting China ahead in the race to set an Asian pricing benchmark that might eventually rival the London gold fix……

It is no secret that the Chinese economy at the end of this year is expected to have $16.7 trillion in PPP, slightly bigger than the $16.6 trillion projected for the U.S.

While size matters, that is the economy, other factors such as history, people, foreign exchange, among others, are also important in making an Exchange work! Challenging London’s 300 years of dominance in gold trade could be difficult, if not impossible.

Having said that, a few years ago no one would have expected Hollywood to have a major presence in China market either. Today China is the largest foreign market for Hollywood. Go figure - 1.3 billion consumers – there may just be enough bullion traders and consumers making SGE THE gold fix!

http://in.reuters.com/article/2014/10/21/china-gold-idINKCN0IA2L920141021

http://fortune.com/2014/05/05/why-china-hates-being-no-1/

https://www.bullionvault.com/gold-news/shanghai-gold-091720144

 

Comments

Louis Daily's picture Louis Daily | November 9, 2014 5:04 am MST

China is performing economic miracles, to be sure, including its challenge to London gold.  It is probably worth noting for some perspective that China is somewhere between 80th and 95th in the world in per capita income (depending on the source) while the US is 10th (not first!).   This might assuage the worries of those who are forever griping about the size of the Chinese economy and that we "are in debt to China".  Until per capita income increases (and it will), perhaps the Communist Party is just being practical in playing down its impressive ascendancy on the world economic stage.   China's per capita income, low as it is compared to many countries, has grown tremendously in the last decade and there is plenty of room to grow more.  The billion plus Chinese consumers' demand for gold is huge: for gifts, as an investment, and as a hedge against inflation.   As Chinese per capita income rose, so did the price of gold--a trend likely to continue.   While there is no serious proposal anywhere to return to a gold standard, gold remains extremely important to every country as a store of value, an investment, and a medium of exchange.  No country mines or refines more gold than China.  China may need to further modernize its financial system, but there is little stopping its gold ambitions.    See:

http://www.bloomberg.com/news/2012-01-11/china-s-gold-imports-from-hong-kong-climb-to-record-on-investment-demand.html   

www.gold.org    (China's gold market: progress and prospects  pdf file)

http://www.foreignaffairs.com/articles/142114/alan-greenspan/golden-rule