China Flexes its Gold Muscle

China Warns Foreign Banks: Participate in the Chinese Yuan Based Gold Price Fix… or Else.

Foreign banks that traditionally support the London and New York dollar denominated gold price fixes may lose Chinese gold import rights if they do not support the soon to be launched Chinese Yuan gold price fix.

Chinese Yuan gold price fix anticipated to give China greater pricing power over gold.

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In June 2015, China announced that it would be establishing a Yuan-denominated gold price fix. The announcement was just one of many of China’s de-dollarization initiatives. At least fifteen Chinese banks are slated to participate in the Yuan based gold fix and China wants foreign bank participation. To date only Chinese entities are slated to participate.

China Flexes its Gold Muscle

China is warning the large foreign bullion banks that they may lose their gold import quotas into China if they do not participate in the Yuan based price fix scheduled to go live in April. Gold imports to China is big business as gold moves west to east. Click here for background on gold’s journey from west to east.

Update April 13: Yuan gold fix set to launch April 19, 2016 Four of China’s largest banks, Standard Charter, ANZ and a dozen other banks will participate in the gold fix.

China’s Rising Gold Power

China has become the world’s largest gold importer, consumer and producer of gold. Its Shanghai Gold Exchange averages over 50 tonnes of gold withdrawals per week and has reached over 2,500 tonnes per annum, dwarfing deliveries on the U.S. COMEX exchange by a factor of nearly sixty to one. Now China wants to play a greater role in helping to set the price of gold.

China is the World Largest Gold Producer

chinese gold mining production 2000-2015

China has increased its gold mining production 150% since 2000 and is now the world’s largest gold producer.

The Shanghai Gold Exchange is Growing Exponetially

Shanghai gold exchange 2009-2015 through week 51

The Shanghai Gold Exchange set a new record for gold withdrawals in 2015.

China is Piling on Gold To Its Reserves

Gold is important to China. It started reporting its gold reserves in July of 2015 after a hiatus of nearly six years of not reporting. Since June 2015 China has reported adding nearly 700 tonnes of gold to its reserves, bringing its official total to 1743 tonnes and making it the fifth largest gold holding nation in the world.

chinese gold reserves chart

Chinese gold reserves grew by 21 tonnes in November 2015 and have increased nearly 700 tonnes since June 2015.

gold reseves by country 2015

China is now the fifth largest gold holding nation on earth.

We have long held that the U.S. based COMEX, where gold futures contracts are traded, will not “collapse” or default, but rather will become less relevant in setting the price of gold.

As gold continues to move west to east, so shall the power to price it. China is making a strong play for that power.

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