China Links New Gold “spot” Contract to Yuan

Found this article on Mineweb.com . Interesting that they would decide to launch this product now since they might be facing a big default event at the end of January. http://www.zerohedge.com/news/2014-01-21/guest-post-23-trillion-credit-bubble-china-starting-collapse-–-what-next

We will have to see how things play out. But it is possible the first signal flare just went up!

China ties new gold ‘spot’ contract to the Yuan
China’s aim is eventually to stand alone without the dollar and the new Yuan priced gold contract is a step towards a greater use of the currency internationally, says Julian Phillips.

Author: Julian Phillips
Posted: Tuesday , 21 Jan 2014
BENONI, SOUTH AFRICA –

Gold Today –New York was closed yesterday leaving London trading around $1,256 for most of the day. Asia overnight took gold down to $1,252. The dollar was virtually unchanged at $1.3551: €1. In London the gold price was Fixed at $1,247.75 down $7.00 on Monday. In the euro, it Fixed at €922.005 down €3.872. Ahead of the opening in New York gold stood at $1,248.55 and in the euro at €922.49. The dollar stood at $1.3550: €1

Silver Today –The silver price stood at $20.20 in Asia before London’s opening. Ahead of New York’s opening, it was trading at $20.07.

Gold (very short-term)

We expect consolidation by the gold price today, in New York.

Silver (very short-term)

We expect consolidation by the silver price today, in New York.

Price Drivers

With New York closed yesterday. Today, will see if the selling from the SPDR gold ETF [GLD] has turned into buying or not yet. The SPDR [GLD] gold ETF and the Gold Trust gold ETF have their respective holdings at 797.054 tonnes and 161.37 tonnes respectively. The shock purchase of 7.498 tonnes on Friday has alerted the U.S. market to the possibility that the gold investment climate there could be changing from winter to summer. But springtime takes longer than a day.

For the benefit of our U.S. subscribers we repeat some of yesterday’s commentary: As you know we at Gold Forecaster have been focused on U.S. gold selling via the U.S. based gold ETFs. And as you know the SPDR gold ETF is the vehicle of choice for U.S. institutions. This fund has sold off around half its holdings in the last 1+ year against a 33% sell off of total U.S. gold ETFs holdings. We have been looking to see when the selling would stop, not when purchases would begin. This purchase surprised us particularly as it is a substantial amount of gold. Bear in mind that the gold market has been in rough balance for the last few months, so a change like this tips the see-saw. This aspect of the gold market is now center stage!

China continues to not only liberalize and internationalize the gold market there it is tying a new gold ‘spot’ contract to the Yuan. The new Yuan priced gold contract on the Shanghai gold exchange is a step towards a greater use of the Yuan internationally as foreigners who wish to buy this product must sell dollars to buy Yuan so they can buy this gold contract.

In this context we need to see how this contributes to the big picture of China’s arrival center stage in the world. China’s aim is eventually to stand alone without the dollar. How big is this story? In the past the developed world took 80% of global income. In the next six years this will drop to 35% with the emerging world taking 65%. The turbulence that accompanies this change favors gold.

Silver – The silver price is marking time today waiting for gold to lead the way.

Julian Phillips is the founder of www.GoldForecaster.com and www.SilverForecaster.com

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