CRISISBOOM

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Following Friday’s news that China has now surpassed India as the world’s largest buyer of gold, it is becoming increasingly obvious that the country is trying to capitalize on the popular interest in the precious metal by transferring the trading infrastructure away from US to domestic capital markets. First, it recently launched a 1 kilo gold futures contract on the HK Merc in an obvious attempt to undermine the Comex monopoly in the space, and next it seems that China has the GLD plain in its sights, as it plans to start exchange-traded funds, tapping rising demand in China, the world’s biggest investment market for the precious metal. Often blamed for the recent volatility in the price of gold, precious metal ETFs have been primarily an instrument available to those with access to the US market. That appears to be ending, and with an entire nation suffering from gold fever (as inflation continues to be goalseeked by the China politburo above expectations in what appears to be a programmed attempt by the Chinese central planners to push its population into gold hoarding) and about to be offered a simple way of investing in (paper) gold, it is likely that the price of gold (and soon thereafter all other commodities) will see unprecedented spikes in price in either direction as millions more are given direct exposure to trading the non-dilutable currency equivalent.

From Bloomberg:

“There are some complexities, as the central bank is in charge of gold management, while we still need to go through the procedures for launching new exchange products,” Wang Zhe, chairman of the bourse, said at a Shanghai forum. There is no timetable and the exchange is working with regulators on the plan, Wang said. China is the world’s largest gold producer and second-largest in overall consumption.

China doesn’t have gold ETFs and investors usually choose to buy physical gold, or invest through contracts traded on the Shanghai Gold Exchange, the Read more…