The American gold market got sent a strong message when the Chinese Gold and Silver Exchange (CGSE) opened its doors this week. Posted by James Randolph on October 21, 2011
China poised to set the gold market on its ear.
October 21, 2011 – The American gold market got sent a strong message when the Chinese Gold and Silver Exchange (CGSE) opened its doors this week. First-day trading in the ‘Renminbi Kilobar Gold’ contract was brisk and the settlement price was $1,694 an ounce. Whatever the forces are that have been holding down the gold price here, they are in for a rude awakening.
That is precisely China’s intent. The CGSE takes China one step closer to its goal of having the renminbi become the next global reserve. They understand gold and they understand the western world’s infatuation with fiat money, so they are heavily promoting the new gold market as an ideal marriage of the two.
As a strong emerging economy the yuan is still appreciating, adding credence to China’s hype that Renminbi Kilobar Gold offers a double safe haven. In fact, at least into the foreseeable future, it should be just that.
Whenever China stubs its toe the pundits here rush to proclaim an end to China’s meteoric rise. But everything is relative, and compared to the withering western economies China still looks mighty good. Their economy may be cooling down, but it is still growing. Even stagnation would be an improvement here.
China’s domestic gold investment is growing at an astonishing rate – currently trebling every two years – which alone is sufficient to drive a healthy market. It won’t take long for American individual and institutional investors to realize the advantages of a gold market that isn’t fettered by special interests.
The CGSE, physically located in Hong Kong, was designed from the ground up to cater to international investors. Its trading day extends from 8:00 a.m. all the way to 3:30 a.m. the following day so investors everywhere on Earth can trade during normal business hours.
Of course I expect it won’t be long before Wall Street starts crying foul. At least for now the CGSE will be a relatively free market and that really upsets their apple cart. Just thinking of them getting their long overdue comeuppance puts a smile on my face.
Better get used to it. There’s a new game in town and it is going to change the rules of gold investing forever.
Senior Staff Writer – Certified Gold Exchange