New bullion contracts rolling out in Shanghai, Hong Kong, and Singapore
New Orleans (Sept 13) New bullion contracts rolling out in Shanghai, Hong Kong, and Singapore. Despite a purported dropoff in China’s gold demand this year since 2013’s record performance, plenty of long-term bullish developments are launching in Asia.
Gold will be key to China’s efforts to internationalize its currency, and the China Daily just issued an article arguing that the current cold war between Russia and the West over Ukraine will motivate Moscow into backing the Chinese currency.
Russia “willing to back” the Chinese yuan: “The apparently long-term rupture of Russia's relations with the West offers an opportunity to the Chinese leadership to enhance its already close relationship with the Kremlin and thus turn the global geopolitical balance in its favor,” it said. “The Russians, angry with Washington, are now more amenable to giving China wider access to their energy riches and their advanced military technology. The Western sanctions pushing Russia out of the international financial system are also making Moscow more ready and willing to back the Chinese yuan against the US dollar.”
Indeed, "the internationalization of the renminbi is a clear trend though it is still in its infancy, with full convertibility still not implemented," China Gold Association President Song Xin told the China Gold Congress & Expo 2014, which opened Wednesday in Beijing. "But gold as a store of monetary value and the purpose it serves in financial markets have already been given great importance."
China’s “next decade of growth”: At the same gold expo, the World Gold Council and the China Gold Association signed a strategic cooperation agreement to focus on and foster China’s role in the global industry. “This partnership will allow us to build even stronger ties with our Chinese counterparts, setting the foundations for the next decade of growth both domestically and on the global stage,” a WGC official said.
And growth indeed should occur, given the increasingly wealthy classes springing up. Sure, growth has slowed somewhat in China, but its economy is on course to surpass the U.S. by 2024, and according to astudy by the Hurun Research Institute, China created 40,000 new millionaires in 2013, bringing the total to 1.09 million. That’s a lot of potential gold buyers.
New gold contracts launching: Meanwhile, major developments are occurring that will foster and cater to gold demand in China. “Gold trading in the Shanghai free-trade zone will begin at the end of the month, while CME Group Inc. is planning a gold futures contract in Hong Kong, underscoring a push for new price benchmarks in the biggest consuming region as demand moves east,” Bloomberg reported.
Shanghai’s “free-trade zone gold trading marks the first time China allows the offshore yuan to be used alongside the onshore currency in a financial market,” said the WGC’s Albert Cheng. “Given the trading volume on the Shanghai Gold Exchange, Shanghai is definitely the biggest gold marketplace in Asia and an important one in the world.”
China attempting to build gold hub: “The free-trade-zone gold trading will boost use of the yuan currency, provide a platform where the onshore and offshore currencies can fuse and trade together, and help pave the way for the yuan to be a global currency,” said Xu Luode of the gold association. “We’re also attempting to be a hub where gold can be traded here and then shipped elsewhere with the vault and other services in the zone.”
Of the new contract launching in Hong Kong, a CME official said: “Hong Kong is a gateway for the Far East bullion market. As demand for gold continues to grow in China and the Far East, and physical bullionmoves into this part of the world, the market is looking at what is specifically happening in this region and is looking for price signals and data.”
Singapore, India also trading, buying: And it’s not just China expanding its gold industry and infrastructure. “The Singapore Exchange is planning to launch a physically deliverable gold contract for wholesalers in the next 1-2 months to meet demand in Asia, the top consumer of the precious metal,” The Business Standard reported.
Meanwhile, as India’s festival season gets under way, signs of increasing demand are in evidence. According to gold blogger Koos Jansen, India’s June gold imports were the highest in 12 months.
“Despite the fact the new Indian government, led by Narandra Modi since May, hasn't lowered the import duties on both gold and silver, Indians keep on buying precious metals. Despite the fact we already knew this, there was less gold being smuggled into the country and more imported through official channels last June; 77 tonnes were gross imported, which is up 48% from a month earlier, and up 75% from June last year.”
Given all these developments across the Asian continent, gold should have plenty of support in the years ahead, not to mention the catalyst to move higher.
Soiurce: Blanchardgold
