“China has launched interbank gold trading at the beginning of this year in an effort to open up the country’s bullion market. The trading mechanism is introduced by Shanghai Gold Exchange and the China Foreign Exchange Trading System.
“It is aimed to boost liquidity of interbank gold trading, and promote market making. Ten banks including China’s big four banks and a local branch of Australia and New Zealand Banking Group ANZ will act as first-tier market makers. Another six smaller Chinese banks are listed as second-tier market-makers.
“Before the new mechanism, banks were not allowed to trade gold with each other and could only buy the precious metal through the Shanghai Gold Exchange, which is the world’s biggest physical trading platform for the metal.” Source CCTV.com
Reuters reported on January 8th ” ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market, four industry sources close to the companies said on Friday.
“China’s ICBC, which took a controlling stake in Standard Bank’s London-based Global Markets business last year, has also applied to become a clearing member of the London gold and silver over-the-counter business.
“No one at ICBC Standard Bank was immediately available to comment and Deutsche Bank declined to comment. The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden..
LONDON, Jan 8 ICBC Standard Bank is buying the lease on Deutsche Bank’s London gold and silver vault, enlarging its footprint in the city’s bullion market, four industry sources close to the companies said on Friday.
China’s ICBC, which took a controlling stake in Standard Bank’s London-based Global Markets business last year, has also applied to become a clearing member of the London gold and silver over-the-counter business.
No one at ICBC Standard Bank was immediately available to comment and Deutsche Bank declined to comment.
The Chinese and South African lender is aiming to fill the gap left by Western banks, which are retreating from commodities to cut costs and reduce regulatory burden.
Larry Summers writes in a 10th January FT article “policy makers should heed the fears of financial markets. They understood the gravity of the 2008 financial crisis well before the Federal Reserve.”
The article continues “…Because of China’s scale, its potential volatility and the limited room for conventional monetary manoeuvres, the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember. Policymakers should hope for the best and plan for the worst…
“…Policymakers who dismiss market moves as reflecting mere speculation often make a serious mistake. Markets understood the gravity of the 2008 crisis well before the Federal Reserve. They grasped the unsustainability of fixed exchange rates in the UK, Mexico and Brazil while the authorities were still in denial, and saw slowdown or recession well before forecasters in countless downturns. While markets do sometimes send false alarms and should not be slavishly followed, the conventional wisdom essentially never recognises gathering storms.“The Chinese financial services sector is about as large relative to gross domestic product as in Britain…
“…The Economist reports that, looking across all major countries over the past several decades, there were 220 instances in which a year of positive growth was followed by one of contraction. Not once did International Monetary Fund forecasts anticipate the recession in the April of the growth year…
“…Over the past year, about 20 per cent of China’s growth as reported in its official statistics has come from its financial services sector, which is now about as large relative to gross domestic product as in Britain, and Chinese debt levels are extraordinarily high. This is hardly a case of healthy or sustainable growth…
“…In recent years, China’s growth has come heavily from massive infrastructure investment; China poured more cement and concrete between 2011 and 2013 than the US did in the whole of the 20th century. This, too, is unsustainable. Even if it is replaced by domestic services, China’s contribution to demand for global commodities will fall… Because of China’s scale, its potential volatility and the limited room for conventional monetary policy the global risk to domestic economic performance in the US, Europe and many emerging markets is as great as at any time I can remember. Policymakers should hope for the best and plan for the worst…
# Note Added 7th January
GOLD PRICE HAS BREACHED $1100
Back to 5th January posting:
ANNOUNCING THE GOLDWATCHER MONITOR
Gold is insurance against the unexpected and the unthinkable. Gold is poised to breach the psychologically and technically important $1100 threshold.
Gold pundits like to punt gold demand as coming from fear or love trades. But they ignore the more important trade trades – i.e. the speculative punts that can account for most the money flowing in and out of gold.
The global risk landscape this time last year was fairly tame and I posted several comments on gold price prospects for the year that proved to be useful. Last month I posted a link to Bloomberg’s Pessimists guide for 2016 that’s also worth reading again.
An easy and ill informed approach to gold this year will be to say the world is in an unholy mess again. BUY GOLD. That sounds like a no brainer – depending whether you think a no brainer is a proposal so obvious you don’t need a brain or a proposal that will only work if you have no brain.
IAN BREMMER’S ANALYSIS ON THE TOP 2016 RISKS
We all have access to quality information in the information age . Here is a link to analysis on the top 2016 risks published in the last few days by the internationally recognised strategist Ian Bremmer.
THE GOLDWATCHER IN 2016
In the seven years since the global financial crisis erupted investor anxiety has been focused mainly on the economic and financial problems that followed . There is still cause for concern over many of these problems. But in 2016 the spotlight has moved to global geopolitical crises and, absent a miracle, is going to stay there.
THE GOLDWATCHER MONITOR
It’s likely gold will be finding its way back on important asset allocation agendas. Institutional and private money managers will need up to date and unbiased information on all aspects of supply and demand for gold and possibly for silver and other precious metals. Supplying such information will obviously be beyond the scope of this open access free blog launched in 2007 to promote The Goldwatcher book.
Providing ongoing reliable information will require a dedicated team of remunerated contributors who will together produce THE GOLDWATCHER MONITOR
For further information on
THE GOLDWATCHER MONITOR
Last year in response to requests to readers of this bog and friends I posted several comments on supply, demand and price expectations. The postings are still accessible on this website.
Picture credit Boomberg
# Note added 8th January 2016
December 15, 2015
Bloomberg News asked dozens of former and current diplomats, geopolitical strategists, security consultants, and economists to identify the possible worst-case scenarios, based on current global conflicts, that concern them most heading into 2016.
# Trump wins U.S Presidency
# Oil climbs to $100 per barrel
# The UK leaves the European Union
# Banks hit by cyber attack
# The EU crumbles under anti-immigration fears
# China’s economy falls, military rises
# Israel attacks Iran’s nuclear facilities
# Putin sidelines America
# Climate change heats up
# Latin America’s lost decade
GOLD : FUTURE SUPPLY, DEMAND DYNAMICS & PRICE INDICATIONS
CPM Group founder and Chief Executive Jeffrey Christian is one of the world’s best informed and most respected commentators on gold. He understands global macro economics, finances gold investing and trading, knows the nuts and bolts of the gold mining industry and publishes reports on all aspects of gold and precious metals. His extensive presentation on The State Of The Gold Market at the Denver Gold Forum meeting last week looks ahead a few years, projects demand recovering from next year with positive supply and demand dynamics ahead. It’s essential reading for investors.
MOVING ON FROM THE GOLDWATCHER:
This BLOG was launched to support The Goldwatcher- Demystifying Gold Investing when Wiley commissioned me to write the book in March 2007.
After repeated hacks that forced us off line twice we relaunched in December last year when friends, driven into frenzies of anxiety by apocalyptic warnings and get rich quick with with gold fantasies, wanted to know what I thought. They will have found the information I posted since then useful.
However by the end of last year content on The Goldwatcher was already more about global events than gold and gold mining. To support a book I am writing on Information, Simple Arithmetic and Common Sense as essential safeguards for investors I launched The Globewatcher and Investor Literacy blogs . Both already have a few headline commens on subjects being addressed in my new book.
I will continue to Tweet as JohnKatz Goldwatcher
Thanks for following us: Hope you will now follow
The Goldwatcher Page InvestorLiteracy.com
& Tweets at @JOHNKATZGOLDWATCHER
CHART GOLD HOLDINGS IN EXCHANGE TRADED PRODUCTS COURTESY OLE HANSEN SAXO GROUP
The above chart tweeted by Ole Hansen reflects two important fundamental developments – further clearance of the overhang of speculative gold in Exchange Traded Products and a significant revival in Indian demand that needs to be reviewed in relation to the Indian Government’s initiatives to monetise gold hoarded in the country aimed at reducing future imports.
Speculative interest in gold may also have been spiced up by the current political impasse over the US Budget that must be resolved by the end of September to avoid any shut down of Government activities. This is potentially unsettling. But the issue will almost certainly be resolved without any shut down that acually interrupts significant Government activities.
Financial markets are already unsettled by these and other concerns including economic problems in China and recent revelations on Volkswagen’s deception on emission measurement – serious on its own and possibly involving other manufacturers. These concerns may also have influenced increased speculative interest in gold. But, unlike the important supply and demand factors illustrated in the chart above, they don’t affect fundamental supply demand dynamics.
No Clear Trend – Bets Both Ways Look Balanced
UPDATE; 25th August 13.30 GMT:
The People’s Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.
It is the fifth interest rate cut since November and will take effect on Wednesday.
The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.
In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.
Blog Posting 10.30 a.m. 25th August 2014:
In a comment Pressure Mounts on China to Act Scott Minerd, Glocal CIO Guggenheum Partners writes:
“…the PBoC will soon be forced to reduce bank reserve requirements while allowing for a more rapid devaluation of the RMB. Time is not on the side of Chinese policymakers. Given the severity of the current domestic slowdown, pressure is mounting for more radical policy action.
“Expect to see further downward pressure on commodity prices, global equities, and U.S. Treasury yields. The first sign that we are approaching a bottom for all three will be when China caves and allows the RMB to adjust to a more appropriate level, which could mean another 25–30 percent decline in the value of the RMB against the U.S. dollar.
“Things will get worse before they get better, and investors around the world are demonstrating appropriate concern. Unfortunately, relief is nowhere in sight.”
Gold is likely to be back on the agenda of investors “demonstrating appropriate concern” over adverse developments and uncertainties.
For information on Goldwatcher Analysis and Events please e-mail
TWITTER : @JohnKatzGoldwatcher
Comments on this blog follow important news and trends and are not intended as a blow by blow commentary on any subject.
I comment frequently on Twitter as #johnkatzgoldwatcher and have recently Tweeted on emerging market outflows rocketing towards a trillion dollars – news on the flow of funds that might affect demand for gold: