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China Controls the Gold Price

In addition to the latest excellent study of the Chinese gold market by the World Gold Council, we have received other reports on the Chinese gold market that differ with the conclusions drawn by the World Gold Council. But we shouldn’t be surprised by this, not only because of the opaque nature of the Chinese gold market and the dearth of accurate statistics that are accessible. Which ones are right is critical for the conclusions each draw paint very different pictures of the future of the gold price.

What has come through the pages of this and other reports on the gold market there is that China is not only the main force in the global gold market, but they control the gold market. With the acquisition of so much gold in the last year and an ongoing persistent demand in the future, they have effective control of the gold price and the market. They play their control very cleverly so that it is not apparent.

If this is best achieved by lower prices, then China will act to ensure lower prices. If higher prices are what it takes they will act accordingly. The only word of caution here is that low prices enable the available discretionary savings of consumers in the retail market to buy a greater volume of gold than higher prices would.

While the leading U.S. banks believe they control the gold price and that it will move in the opposite direction to the state of the U.S. economy, the reality is that if China decides to lift prices because it can access more gold, it can easily do so. If it prefers lower gold prices it can engineer the situation to leave them low. They have full control in this regard.

Neither U.S. banks, nor High Frequency Trading has the power to lower their control. Indeed it appears that the Chinese are taking full advantage of those in the U.S. who want to see lower gold prices and making room for them. What these market players are doing is ensuring that gold in the developed world is moving from west to east ahead of a time coming, in the near future, that will require as much gold as possible to be accessible to nations in a changing, turbulent, financial world.

Source Financial Source

 

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