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SmallCHange
Penny Sorter Member
USA
70 Posts |
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fiatboy
Administrator
912 Posts |
 Posted - 01/09/2008 : 14:24:53
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I'm probably missing the big picture, but here are my thoughts on what's going on:
1. Exuberance over China now being a major player on the world gold scene.
2. The first stages of a decoupling from the London Gold Fix and Western price manipulation. The Chinese are still beholden to the City of London and the Gnomes of Zurich, but they're trying to break away. Pushing gold higher is an easy way to do this.
3. Historical factors, including a very subtle inferiority complex. China knows that historically, India has been much wiser handling gold. For thousands of years, more gold has flowed in to India than out---Europe, as well as China, has given gold to India in exchange for all sorts of goods and services (that don't last as long as gold). China doesn't want to miss the boat yet again. The Chinese stock market, despite its rise, has actually disappointed many Chinese investors. They want something tangible that's not a promise or an instrument of debt. Granted, it's ETF's we're talking about, but this particular ETF is a baby step away from the debt nightmare that is strangling so many of the world's top economies.
4. The usual suspects: a growing middle class in China, a world-wide shift away from paper, falling dollar, an unsustainable yen-carry trade, a manipulated renminbi/yuan exchange rate, etc.
5. It's in Shanghai, not Hong Kong. This is a big psychological boost for the Chinese. To them, Hong Kong is a relic from the days of colonialism. Like Macau, Hong Kong has its place and serves its purpose beautifully, but Shanghai is unquestionably and indelibly Chinese. If anyone would have traded gold in China 50, 30, or even 10 years ago, Hong Kong probably would have been the place. But no longer. Similarly, this gold exchange isn't in Taiwan. Another posthumous one-up for Mao over Chiang Kai-shek.
This article portends bigger changes in the price of gold than many realize. In a nutshell, a new, wild variable has just been added to the equation. If nothing else, it makes things more interesting. |
"Bart, it's not about how many stocks you have, it's about how much copper wire you can get out of the building." --- Homer Simpson |
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SmallCHange
Penny Sorter Member
USA
70 Posts |
Posted - 01/10/2008 : 06:18:06
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I had some of the same thoughts as you, but still a $73 difference in Gold Futures between two different exchanges seems unbelievable in the electronic age. Thats a 7-8% difference between two markets trading the SAME thing. Seems like it opens the door for those that can play in both exchanges to make ALOT of money, especially in a Futures Market.
I suspect that probably the Shanghai market is also not an true open market exchange at this point and they also must somehow limit the players that can be involved in it. No way would any exchange allow the average person to run arbitrage between the two markets and make 7 or 8 percent.
Also, Shanghai prices gold in Yuans so a free gold exchange in China could/would be in essence, a gold "backdoor portal" to allow the Yuan to really "float" against other currencies which the Chinese seem NOT to want at this point, so I would expect that the Shanghai gold futures market is indeed being manipulated, and being priced right where they want it.
Whether or not Shanghai Gold Futures are manipulated or not, if these pricing levels continue to be so far above ours, physical gold flow, will at some point, greatly increase to China as their market is, in essense, willing to pay alot more for it & maybe that is what they really want.
I honestly do not know what to think.
Maybe yesterdays trading is a glitch from first day of futures trading on the exchange. Maybe will force our Gold & Gold Future Markets into being less manipulated as well. This Chinese Gold Futures Market seems like it could be a REAL threat to as you called it and I agree, the London Gold Fix.
We will see what happans today. For sure like you stated, "it makes things more interesting".
I also heard that they are going to start trading spot platinum at the Shanghai exchange, as well, at some point. No word on any Shanghai Platinum Futures exchange being started yet tho. |
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horgad
1000+ Penny Miser Member
USA
1641 Posts |
Posted - 01/10/2008 : 07:14:21
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| All I can say is wow and thanks for the link. |
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fiatboy
Administrator
912 Posts |
Posted - 01/11/2008 : 21:27:13
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| Thanks, SmallCHange, for the insightful commentary! |
"Bart, it's not about how many stocks you have, it's about how much copper wire you can get out of the building." --- Homer Simpson |
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Gold Futures in China
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