CHINA Announces they will Set Gold Price by years end...

CCC2010 · June 25, 2015 9:41PM

China Will Set Price of Gold (Link)

On June 25, a representative from the Shanghai Gold Exchange announced that they are planning on establishing a new physical gold price mechanism by the end of the year that will compete with London and the U.S. Comex. Expected to be denominated in Yuan, this new gold price platform comes less than 10 days after China became the first Asian country invited to be a part of the London gold fix, and unlike the U.S. Comex, will deal in direct physical gold sales rather than in paper futures and derivative contracts.

When the Shanghai Gold Exchange (SGE) opened in 2014, it set out to usurp the West's control over gold and their pricing of gold through the paper markets. And in less than a year, the SGE has created the world's largest gold fund, and is now ready to take over pricing and price discovery for the monetary metal. In fact, sources claim that right now premiums on large sales of gold bullion are ranging as high as $600 over the current paper spot price.

TwoSides2aCoin · June 25, 2015 10:20PM

Who has the gold makes the rules.

topstuf · June 25, 2015 10:27PM

And you can still get slabbed Saints for WAY less than a $600 premium.

TwoSides2aCoin · June 25, 2015 10:39PM

<< And you can still get slabbed Saints for WAY less than a $600 premium. >>

^ that's rudimentary and key. People might open their eyes to this statement and jump in soon.

CCC2010 · June 25, 2015 11:18PM

For those of us that really do not know or are financially savy....What is the implication of this happening by the end of the year...Say if China says the price of gold is now $4K an ounce. What is the effect of that in our financial system who are mainly holding paper? Then what does this mean to the average person on the street...would we see some adverse effect like our economy collapsing...price of goods and services sky rocketing...chaos...mayhem and murder happening??? Just want to be aware and not caught off guard. Thanks for your input in advance.

derryb · June 25, 2015 11:38PM

No affect, buyers will buy it where it is cheapest. Only when China holds ALL of the gold will their pricing mechanism matter to outsiders.

trozau · June 25, 2015 11:39PM

My take on this is that the price of gold in US$s will simply go up. No economies collapsing. Other US commodities will stay the same and reported inflation will be nil to low (as per US government fuzzy measurement rules). The US has been steadily decoupling from gold since 1971. The US may lose influence in gold pricing if China is successful with their scheduled plans.

derryb · June 25, 2015 11:41PM

When two or more gas stations put a price on gasoline it usually goes down.

rawteam1 · June 26, 2015 12:34AM

<< And you can still get slabbed Saints for WAY less than a $600 premium. >>

Lol, don't think they have any interest in saints, and they rarely if ever pay a premium for gold...

roadrunner · June 26, 2015 12:40AM

What happens when 3 coin dealers are paying the following prices for the same coin: dealer A $1100, dealer B $1100, dealer C $1300?

What happens is that the market participants start buying up whatever supplies they can at higher than A's or B's buy prices and start sending them to C. The market flow will be to C (China/India) until they get their fill.
Dealer's A and B start raising their buy and sell prices. How much gold can the Chinese central bank and the populations of China and India buy? (2.5 BILL people).

topstuf · June 26, 2015 1:27AM

<< 

<< And you can still get slabbed Saints for WAY less than a $600 premium. >>

Lol, don't think they have any interest in saints, and they rarely if ever pay a premium for gold... >>

Just talking what I am doing. I can't beat China.
I ...can.... anticipate SDB rules and the draconian controls that will come with any parabolic rise in gold.

Is that imminent? Dunno. But I'm set for it if it does.

mhammerman · June 26, 2015 1:57AM

"And since the COMEX has not actually delivered any metals for more than two years despite them being a futures delivery market..."

Seems like there have been more than a few articles posted here and on the web over the past couple of years about someone wanting delivery from the COMEX. The stories just evaporate as does the demand for delivery as the contracts are settled for USD's instead. COMEX delivery is not the same as repatriating physical ala Deutchland, Venezuela, et al. It seems that the COMEX has devolved into a paper market backed by a too small to cover inventory of actual metal. Maybe Texas got it right by setting up its own depository. One thing for sure, the paper boys will wet their pants if gold starts trading physical for Yuan on the world markets while people here are playing with paper gold in USD at the COMEX. There have been a number of articles about China acquiring gold, gold mines, physical deposits of the metal over the last two or three years...read Sun Tzu.

Recommendation: Keep your stash, this is going to get better...and hold out for some of those 24K SLQ's.

CCC2010 · June 26, 2015 2:09AM

I was just thinking of converting my traditional 401 K to Roth IRA and take out the money to buy as much gold as i can before this happens. What do you guys think? Or would this be tantamount to shooting myself in the foot?

tincup · June 26, 2015 2:18AM

<< I was just thinking of converting my traditional 401 K to Roth IRA and take out the money to buy as much gold as i can before this happens. What do you guys think? Or would this be tantamount to shooting myself in the foot? >>

My crystal ball can't help you on this one....

My own take on it is that it is usually better to diversify rather than place a large one sided bet..... ..... but to each their own.

guitarwes · June 26, 2015 2:39AM

<< I was just thinking of converting my traditional 401 K to Roth IRA and take out the money..... >>

You don't have to convert it to take it out. Just be sure to hold on to enough to pay the taxes + penalty on the withdrawal.

rawteam1 · June 26, 2015 3:41AM

Lol, this is like a big secret stock tip....so what to do, sell the news...

Baley · June 26, 2015 3:43AM

I hope They are able to "price" gold higher so I can sell some... or, alternatively, I hope they price it lower so I can buy some, or, if They do not do either of those, I hope They keep gold the same so I can hold this amount.

derryb · June 26, 2015 3:47AM

<< 

<< I was just thinking of converting my traditional 401 K to Roth IRA and take out the money..... >>

You don't have to convert it to take it out. Just be sure to hold on to enough to pay the taxes + penalty on the withdrawal. >>

and probably with a quarterly estimated tax payment to avoid a penalty for waiting until the end of the year on a high amount. The estimate doesn't have to be accurate it all balances out when you file at the end of the year.

CCC2010 · June 26, 2015 4:10AM

Good advice everyone. I guess at this point it would be prudent to just diversify and not put all my eggs in one basket. Just buy whenever my budget allows and not get too crazy about this. (hmmm am i going to miss the boat if i take this path and not being aggressive enough? ) OK going back to staying put and diversifying.

piecesofme · June 26, 2015 4:47AM

Maybe it will create what I would've like to have had all along, a true PHYSICAL market price. There will still be the manipulated paper market which is bogus and misleading to follow, but having a true physcal market value would be a good thing and would make it mirror true supply and demand, not what a piece of paper says someone has in hand.

Baley · June 26, 2015 5:05AM

There IS a "true physical market value" for tiny pieces of "commercial" or "retail gold", it happens every minute of every day, all over the globe, based on local supply and demand for that SHape the gold is is fabricated into, versus the Paper Price for stacks of the giant "good for delivery" 400 oz bars, which no one except the largest producers and consumers want to make or take ACTUAL delivery of

roadrunner · June 26, 2015 6:38AM

Give me the money to buy some 400 oz GD bars and I'd be happy to buy some....even keep them for a while.

jmski52 · June 26, 2015 7:31AM

It seems that the COMEX has devolved into a paper market backed by a too small to cover inventory of actual metal. Maybe Texas got it right by setting up its own depository. One thing for sure, the paper boys will wet their pants if gold starts trading physical for Yuan on the world markets while people here are playing with paper gold in USD at the COMEX.

Maybe it will create what I would've like to have had all along, a true PHYSICAL market price. There will still be the manipulated paper market which is bogus and misleading to follow, but having a true physcal market value would be a good thing and would make it mirror true supply and demand, not what a piece of paper says someone has in hand.

I agree with the above two comments. There will come a point at which arbitrage between the physical market in China vs. the paper market in New York will seriously burn some of the players. Some numbnuts in a financial district will figure out a straddle position between the two markets using ETFs or futures contracts, and someone is gonna want their stuff when it never existed in the first place. China wouldn't be playing in this game if they didn't think they would win it. New York thinks they can do whatever they want. It could be interesting, I hope it doesn't result in more confrontation, but it probably will.

TwoSides2aCoin · June 26, 2015 7:40AM

I hope they don't set it much lower than we've set it

I mean after all, it was $20 less than a hundred years ago…. until 1933, in fact. Nobody had to set anything. Did they ?

mhammerman · June 26, 2015 8:10AM

"There IS a "true physical market value" for tiny pieces of "commercial" or "retail gold", it happens every minute of every day, all over the globe, based on local supply and demand for that SHape the gold is is fabricated into, versus the Paper Price for stacks of the giant "good for delivery" 400 oz bars, which no one except the largest producers and consumers want to make or take ACTUAL delivery of"

So, if someone buys a 100 oz contract then there is no way for it to be delivered? In that case, it's just a paper play with no anticipation of delivery? All these questions.

bronco2078 · June 26, 2015 8:43AM

<< I hope they don't set it much lower than we've set it

I mean after all, it was $20 less than a hundred years ago…. until 1933, in fact. Nobody had to set anything. Did they ? >>

Ahem , 100 years ago gold did not have a price in dollars , dollars had a price in gold

TwoSides2aCoin · June 26, 2015 10:36AM

Nice one Bronco. Kudos.

cohodk · June 26, 2015 1:44PM

Same as it ever was. Those looking for something different will again be dumbfounded.

cohodk · June 26, 2015 1:51PM

I do find it interesting that no one (save maybe one or two folks

) thinks the "true physical price" could actually be much lower than the current true price by which it trades everyday.

Imagine a market where the final consumer got excited about a weekend special on tiny little 1/10 oz shiny yellow coins. Sounds like a strong and vibrant market to me. Haha

rawteam1 · June 26, 2015 2:40PM

<< Maybe it will create what I would've like to have had all along, a true PHYSICAL market price. There will still be the manipulated paper market which is bogus and misleading to follow, but having a true physcal market value would be a good thing and would make it mirror true supply and demand, not what a piece of paper says someone has in hand. >>

????????? You have a true phyzz market here??? MTB, Apmex, Prov, Gmart, JM, GainesV, and many more...
What prices in China stays in China...
Gas anyone????

Overdate · June 26, 2015 5:24PM

<< ". . . premiums on large sales of gold bullion are ranging as high as $600 over the current paper spot price." >>

Who would pay a 50% premium over the offering price of .999 gold coins for bars of gold bullion? Couldn't they save or make a bundle just buying up these coins in quantity and melting them into bars? Just asking.

derryb · June 26, 2015 9:59PM

China's savers have put aside $21 trillion dollars. With a crashing Chinese stock market and a government that encourages gold ownership look for their personal metal demand to exceed their record sovereign demand. Foreign markets will also benefit as the Chinese look for the best investments.

cohodk · June 26, 2015 10:46PM

<< China's savers have put aside $21 trillion dollars. With a crashing Chinese stock market and a government that encourages gold ownership look for their personal metal demand to exceed their record sovereign demand. Foreign markets will also benefit as the Chinese look for the best investments. >>

Yup. It's called inflation.

From a Bloomberg article...Text “If they’re going to be gradually opening up to be like the U.S., then vast amounts of money are going to flow overseas,” said David Dollar, who served as U.S. Treasury attache in China and is now a senior fellow at the Brookings Institution in Washington. “I would speculate that it favors the U.S. over everything else.”

The Chinese people love America and want a piece of it. Got stocks? Got real estate?

Gold, just as in this country, will always be the "other" asset class. Attracting money when all the other assets are already gobbled up and unaffordable. Dang relative valuation theory.

piecesofme · June 26, 2015 11:52PM

????????? You have a true phyzz market here??? MTB, Apmex, Prov, Gmart, JM, GainesV, and many more

One that isn't so tied to the admitted manipulated NY market. One where you actually have to have the physical to sell the paper, not say you have it, you actually have to have it if the owner of the contracts actually wants the physical.

I get what you're saying...the mentioned places have it in hand, but their price is tied to the manipulated NY paper market. That's the difference I'm speaking to.

MsMorrisine · June 27, 2015 12:06AM

<< ????????? You have a true phyzz market here??? MTB, Apmex, Prov, Gmart, JM, GainesV, and many more

One that isn't so tied to the admitted manipulated NY market. One where you actually have to have the physical to sell the paper, not say you have it, you actually have to have it if the owner of the contracts actually wants the physical.

I get what you're saying...the mentioned places have it in hand, but their price is tied to the manipulated NY paper market. That's the difference I'm speaking to. >>

true, but I question this 600 number.

Step 1, don't buy a lot of it at once, take it out under 600 by hitting these places. Sure, it's more trouble, but at a 50% markup per ounce, the trouble gets paid for.

And what moron pays a 50% markup? The only possible explanation is perhaps there is a huge import tax in China and that is the main reason for the mark up? But that is not the way the article is written. it is written that the order was so large for physical that the premium was so high. (the us mint buys like 1 million ounces of gold over the course of a year, btw)

This article I place in the same category as the fake 400oz tungsten story. I think China is trying to manipulate their way into being a player in the market by scaring the world into believing they are the go to place. Wow. We are being soaked. We could sell for $600 more.

Well, they can take delivery on futures contracts and prove what the rumors are. If the gold is not there, the price will skyrocket on its own. Perhaps it is too soon for that for them, as one of their top imports is gold. They still want to buy it cheaply. Funny how that works, huh? The real price is $600 higher, but heaven forbiid the market price actually gets there.

Just another BS story in an attempt to guide gold traders to trading with China. Well, I don't like their tactics and find them fishy. It makes me less prone to doing business with them instead of more. If we want fishy tactics we have the futures markets here and the "London fix" to deal with already.

Oh, and if they are going to, ahem, "set" the price and gold is a top 5 import, will they be inclined to set it high or low?

Baley · June 27, 2015 2:01AM

<< I hope They are able to "price" gold higher so I can sell some... or, alternatively, I hope they price it lower so I can buy some, or, if They do not do either of those, I hope They keep gold the same so I can hold this amount. >>

good strategy.

rawteam1 · June 27, 2015 2:09AM

If they were getting plus 600, all the gold on eBay would be gone with that 21 tril...

bronco2078 · June 27, 2015 2:30AM

<< 

true, but I question this 600 number.

Step 1, don't buy a lot of it at once, take it out under 600 by hitting these places. Sure, it's more trouble, but at a 50% markup per ounce, the trouble gets paid for.

And what moron pays a 50% markup? The only possible explanation is perhaps there is a huge import tax in China and that is the main reason for the mark up? But that is not the way the article is written. it is written that the order was so large for physical that the premium was so high. (the us mint buys like 1 million ounces of gold over the course of a year, btw)

This article I place in the same category as the fake 400oz tungsten story. I think China is trying to manipulate their way into being a player in the market by scaring the world into believing they are the go to place. Wow. We are being soaked. We could sell for $600 more.

Well, they can take delivery on futures contracts and prove what the rumors are. If the gold is not there, the price will skyrocket on its own. Perhaps it is too soon for that for them, as one of their top imports is gold. They still want to buy it cheaply. Funny how that works, huh? The real price is $600 higher, but heaven forbiid the market price actually gets there.

Just another BS story in an attempt to guide gold traders to trading with China. Well, I don't like their tactics and find them fishy. It makes me less prone to doing business with them instead of more. If we want fishy tactics we have the futures markets here and the "London fix" to deal with already.

Oh, and if they are going to, ahem, "set" the price and gold is a top 5 import, will they be inclined to set it high or low? >>

If someone wanted it so much that they were willing to pay a 50% markup then they want it to insure against a failure of a currency.

In a failure of currency a 50% markup is trivial . Why worry about it ? especially if you know that the currency you are paying in only has value in the moment.

They are by all accounts delivering physical at this exchange. They don't deliver physical over here in large amounts. Two different markets , why shouldn't pricing be different ?
Lets just wait and see if this has legs then it will probably become obvious that if you want real delivery you go to China and if you want to masturbate over charts and shave pennies over imaginary gold you go to COMEX.

Physical is never going to cost less than paper , who is to say how much more it should cost ?

rawteam1 · June 27, 2015 2:50AM

<< Physical is never going to cost less than paper , who is to say how much more it should cost ? >>

Though this may ring true for you and the avg retail buyer, as a rule it is false... I'm surprised you don't know this or maybe just overlooked it...

bronco2078 · June 27, 2015 3:14AM

<< 

<< Physical is never going to cost less than paper , who is to say how much more it should cost ? >>

Though this may ring true for you and the avg retail buyer, as a rule it is false... I'm surprised you don't know this or maybe just overlooked it... >>

I was thinking of large amounts like you would take delivery of from an exchange . I've never taken delivery of any 400 oz bars though so I don't know what it actually costs.

I would consider those costs a premium to spot.

I know if I buy gold coins from my dealer he paid less than the paper price for them when they walked through his door.

MsMorrisine · June 27, 2015 4:32AM

I once looked into and I think it is cheaper to take delivery on a futures contract than buy a 400 oz from someone
But it is true that technically those costs would place that true cost over spot.

Stamping or pouring a bar and having the overhead paid for the shipping, SG&A and all means physical typically costs more than futures prices.

MsMorrisine · June 27, 2015 4:33AM

<< 

<< Physical is never going to cost less than paper , who is to say how much more it should cost ? >>

Though this may ring true for you and the avg retail buyer, as a rule it is false... I'm surprised you don't know this or maybe just overlooked it... >>

Got a link for a 400 oz good for delivery bar that is priced under the front month paper price?

I'll let you beat the June 2016 quote off CME of 1179.70

Baley · June 27, 2015 5:51AM

Got a link for a 400 oz good for delivery bar that is priced under the front month paper price?

Folks that deal in these deal in quantity and average out the per-ounce handling price.

A single bar is a novelty, and quite illiquid all by it's lonesome.

Needs a lot of logistics to ship and insure that will cost the "taker of delivery" quite a bit of extra cash money to get people to spend their PT (precious time) doing.

rawteam1 · June 27, 2015 7:16AM

Lol, Ms M your linear thinking won't be able to figure it out...

Baley · June 27, 2015 7:30AM

It's kind of counter-intuitive, but [relatively] large denomination "things" are less liquid and therefore less practical "stores of wealth" than you'd expect, certainly less liquid and convenient than smaller ones.

For example, a few 1/10 and 1/4 and half and ounce gold coins: very liquid at any coin, pawn, and most jewelry stores worldwide, in exchange for local legal tender you can spend on lunch, a room for the night, or a travel ticket to somewhere else. A 400 oz gold bar? not so liquid! Who can buy it from you or "make change"? They need an assay, they need all these other assurances of authenticity, your legal ownership and therefore "right" to sell it (could be stolen, or otherwise Owned in whole or part by someone else other than you, they need to provide security and insurance and transport and find a buyer, the number of people or business prepared to make you ANY kind of offer, much less a "fair" one, is vanishingly small, almost everywhere, worldwide.

Another example, an "illegal" or borderline legal one in some jurisdictions: A dime bag, eighth ounce, or "lid" (0z.) of marijuana, you can buy or sell almost anywhere in the world. A duffel bag full? not so much.

Or my latest hobby that I'm just starting to get a renewed interest in: edged weapons. A decent repro sword in a historically accurate style is somewhat liquid for $100-200. A "real" museum or advanced collector piece "worth" $10k? Not So Much! Got to go to a relatively major antique store or auction venue. Same thing with firearms: got a decent revolver or auto? easy to sell. Got a full-auto M60 or BMG50? good luck!

MsMorrisine · June 27, 2015 7:48AM

<< Lol, Ms M your linear thinking won't be able to figure it out... >>

if you are talking outside the assumed thinking of a physical buy price and talking about overall costs of trades of "never to be delivered" paper gold v. only trading what you have physical, then I can see your where you are coming from.

MsMorrisine · June 27, 2015 8:00AM

<< It's kind of counter-intuitive, but [relatively] large denomination "things" are less liquid and therefore less practical "stores of wealth" than you'd expect, certainly less liquid and convenient than smaller ones.

For example, a few 1/10 and 1/4 and half and ounce gold coins: very liquid at any coin, pawn, and most jewelry stores worldwide, in exchange for local legal tender you can spend on lunch, a room for the night, or a travel ticket to somewhere else. A 400 oz gold bar? not so liquid! Who can buy it from you or "make change"? They need an assay, they need all these other assurances of authenticity, your legal ownership and therefore "right" to sell it (could be stolen, or otherwise Owned in whole or part by someone else other than you, they need to provide security and insurance and transport and find a buyer, the number of people or business prepared to make you ANY kind of offer, much less a "fair" one, is vanishingly small, almost everywhere, worldwide.

Another example, an "illegal" or borderline legal one in some jurisdictions: A dime bag, eighth ounce, or "lid" (0z.) of marijuana, you can buy or sell almost anywhere in the world. A duffel bag full? not so much.

Or my latest hobby that I'm just starting to get a renewed interest in: edged weapons. A decent repro sword in a historically accurate style is somewhat liquid for $100-200. A "real" museum or advanced collector piece "worth" $10k? Not So Much! Got to go to a relatively major antique store or auction venue. Same thing with firearms: got a decent revolver or auto? easy to sell. Got a full-auto M60 or BMG50? good luck! >>

if someone is full of BS and saying "large quantity" is being bought at close to $600 over, then 400 oz is plenty liquid. But if gold were in such tight supply that a "large quantity" can't be purchased but for a 50% markup, where is the global gold bullion disruption -- for the first time I've seen this apparently Sounth African 1oz gold bar and the mint is not on allocation -- besides all the other things I've previously talked about.

Expectation of a currency run? No way. It can be rationalized like the fake 400 oz bar story(stories) and people can find ways for it to sound plausible, but that doesn't make it true. I think that car with the jato units strapped to it traveled 300 feet before hitting the stone embankment. Is the backorder status of the Jackie Kennedy proof (just the proof) going to be the market disruption caused by the $600 over order?

The fake 400oz bar story and this $600 over story are pure bs. quack quack.

(notice in the FY2013 mint annual report that the gold working stock bars pictured are on the order of 400 oz each. The mint uses the Treasury's gold to mint and open market buys the re-stocking amount when they make sales. Yet the bars pictured aren't 1 oz'ers, they are 400 ozers. And they do about 1 million toz a year. Yeah... that $600 over purcase was so hard to fill that every mint in the world went on gold allocation. right.)

streeter · June 27, 2015 11:21AM

OK, that settles it. The experts on 400oz bars have spoken.

I don't travel in these circles but I know a couple of people and one is a friend that have 400oz bars in the safe. My friend bought his at a little over 100 large -- he wouldn't miss his. If he got crunched he'd sell it back to MTB.

jmski52 · June 27, 2015 1:26PM

The biggest bar I've ever had was a 100 oz. Sunshine Mining bar. A gold 400 ozer is getting up there, and it would be hard to be nonchalant about it.

derryb · June 28, 2015 12:25AM

Those that do not supply, sell or buy should have no role in price discovery.

JazzmanJAB · June 28, 2015 11:43AM

Is anyone concerned, that if this would happen, that the USA would invoke the same deal they did in 1933 ?

Take all the gold we own ?

I am.

CHINA Announces they will Set Gold Price by years end...

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