Wednesday, February 8, 2017

Did the Shanghai Gold Exchange force London to reveal its reserves and try to compete with a new physical market?

In late 2015, China opened up what would soon become the world's largest physical gold market, leaving both London and New York to hide behind their paper trading futures exchanges.  And as more and more action has moved into the Pacific Rim over the past year and a half, one has to ask the question if this is the reason why London suddenly chose to reveal their physical reserves last weekend, and with the intention of opening up their own physical market to compete with Shanghai?

In a move to increase transparency, London's gold bullion market is considering revealing the amount of bullion held in vaults within the city for the first time in its history. According to recent reporting by the Financial Times, this move would include gold bullion held by the Bank of England as well as other institutions. The leaders in the debate over transparency shifts are the London Bullion Market Association. Why might London be considering such a shift at this point in time, and what could it mean for the future of gold, both in England and around the world? 
According to the report, many of the largest banks around the world are pushing for gold to be traded on an exchange, a marked shift from the current bullion market system. The London Bullion Market Association argues that an exchange would work to convince regulators that "banks trading bullion should not have to face more onerous funding requirements." The reason that this shift is necessary, the Association feels, is that London gold is traded directly between sellers and buyers, meaning that essentially no data of those transactions makes it out into the broader analytical world. The Association has estimated that daily gold trades in London may total $26 billion, although that number is difficult to confirm and there are no official data points to cite. 
The Association believes that moving toward an exchange and documenting the transactions of gold bullion in the city will provide greater transparency. How it might affect the market and the gold bullion prices and trade levels in particular is a bit more difficult to say. If London moves to trade bullion through an exchange, will other cities or countries follow suit? Some analysts believe that this could be the beginning of a much larger trend. - Investopedia
In addition, it is rumored that Dubai is in the process of expanding their physical gold markets following January's inclusion of gold investments into Sharia Law Finance.  And with the potential of millions of new customers seeking to purchase physical gold rather than paper futures, it is likely that several markets will look to cash in on the New Gold Rush, and in doing so will have to forego the years of secrecy that they have cultivated in disallowing true audits of their gold reserves.

3 comments:

China has started to dictate it's financial prowess all over the world. It is now forcing major financial institutions and stock markets to rethink. The best part of news is this

The Association believes that moving toward an exchange and documenting the transactions of gold bullion in the city will provide greater transparency. How it might affect the market and the gold bullion prices and trade levels in particular is a bit more difficult to say. If London moves to trade bullion through an exchange, will other cities or countries follow suit? Some analysts believe that this could be the beginning of a much larger trend.

Aye. And I think London desperately wants in as well on the Sharia Law Finance action.

The Golden Rule:
A country or enterprise will be 'the' global power upon possessing the majority of the world's physical gold & silver and manages a transparent market for physical gold & silver. . . . until the venom of man's frailty games the system.

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