The Shanghai International Gold Exchange Is Launched!
Without much coverage in the western world, probably because no one cares about gold right now, the Shanghai International Gold Exchange was launched last Thursday night. Along with this launch was also an English version of the rule book, describing every detail on the workings of the SGE and its brand new subsidiary the Shanghai International Gold Exchange (SGEI).
At the opening ceremony of the SGEI Zhou Xiaochuan, the governor of the central bank of China, attended and spoke. This shows perfectly the different perception of gold in China over the US. Zhou’s comments at the opening ceremony were as follows.
“This event is a major milestone in China’s opening of its financial market to foreign investors.
…Our Premier Li Keqiang came to the Free Trade Zone this afternoon as a show of encouragement for the unveiling and launch of the International Board. He also invited Mayor Yang Xiong and I to attend the launch ceremony this evening to offer his congratulations, as well as to express his hope that the International Board be shaped into a marketplace with global influence
…Gold market is an important and integral part of China’s financial market. We are now the largest gold producer, as well as the biggest gold importer and consumer in the world. In recent years, the People’s Bank of China has taken to heart the national policies and guidelines on greater reform and opening-up of our entire financial sector, and made steady improvement to laws and regulations of the gold market, promoted its well-regulated growth and development, and was the main driver in transforming China’s gold market from a market for commodities into a market for financial products; from a market for purely spot trading to a market offering both spot and derivatives trading; and from a domestic market into an international one.
… the International Board will bolster China’s gold market toward greater trading volume and centralization, further highlight the price discovery function of the gold market…
…People’s Bank of China will continue to support the sustainable growth and sound development of the China’s gold market.“
You are right CFS. That move upward in the silver premium is significant. I also found the gold premium movements this year interesting. Since bottoming in March the premium has been on a steady rise.
Very encouraging. Would like to hear a rational explanation of the Silver premium from a Bear. My explanation is pretty simple supply weak and demand strong. The gold premium isn’t significant enough to get too excited about at this point.
I believe that the goals of the exchange is long term and ambitious. There have been credibility issues with Chinese companies in the past. The government has been trying hard to punish the wrongdoing out of greed by the vendors. So I will not worry about manipulation out of Shanghai Exchange for a while since they will be short-sighted to ruin it from the beginning. Then there comes the practicality of their goals. I feel they are reachable in the long run and China is in desperate need of the pricing power for commodities. It has been known for manipulation of these prices in the past which caused huge loss for Chinese companies. The trade in RMB for this exchange also facilitates Chinese Yuan as a major world currency. China has the perception for over a century that Western alliance is and will attack China in any form and shape, so the purchase of gold is very strategical. I am not convinced that they will back the Yuan with gold but I am sure gold will be used as assurance for the financial system and used in extreme cases. After gold exchange, it will be the oil exchanges so the position of US dollar will be challenged and chipped away. The weakness will show itself once the dollar is no longer the dominant currency. US may have to devalue in a major way to balance the debt load and trade. Regardless what, there is no country in the history which owe so much to so many people.
Asking again in this thread …..saw in a recent Goldcore article:
“Like everything in China, the SGE thinks big and it currently employs a network of 58 certified vaults, 55 of which are for storing gold and 3 of which store silver. ”
Seems to me 55 vaults for gold and THREE for silver is quite a statement regarding relative above ground stores of the respective metals; What do ya think?
I am surprised that they have so many. I know they have had four 2000 ton vaults now. Since silver is consumed so we don’t need that many storage vaults and at same time it means there is very little above ground silver to be temporarilly stored. The silver will flow out to manufacturers almost immediately after it is sold. If we have as little storage for grains as for silver, there will be mass starvation and a lot of fear. People seems to ignore the possible shortage of silver untill it happens. It is criminal to burn through a few thousand years’ human silver production in the short period of time just to satisfy our greed. It is just insane. There is no other material suffers this fate.
That is a very interesting stat MNH. What I take away from the lack of silver warehouses is that China may value silver more as an industrial metals and therefore no need to store as much. Much like what Lawrence is saying about the flow of the metal.
My opinion is just opinion
MNH………..ditto on the “statement”….
I THINK THE SHORTS…….better hold on to their shorts…………
Silver is in Backwardation in Shanghai.
That usually means shortage.
GDXJ reached its Point and Figure target today. Here’s the weekly arc chart that I’ve been posting for months now. It’s interesting how price continues to interact with the Fibonacci arcs.
http://stockcharts.com/h-sc/ui?s=GDXJ&p=W&yr=3&mn=3&dy=0&id=p73592324970&a=359708986&listNum=1
Interesting to see the rise in premium for silver over the last couple of months.