The mechanism used to determine the price of gold and silver, the London fix, is under pressure and China, of course, wants to take advantage of this situation to have more to say on the way precious metals prices should be determined in the future.
As a reminder, the London silver fix, used to determine the price of silver, will end in August of this year.
China, the largest producer and importer of physical gold in the world, has started to approach some foreign banks and the other main gold producers in order to have them participating actively on the « Global Gold Exchange », in Shanghai.
The Shanghai Gold Exchange (SGE) has obtained from China’s central bank an agreement to open a physical gold trading platform in Shanghai’s free-trade zone.
The timing of this launch is synchronised with the questioning about the reliability of the London fix, a fixing mechanism under the influence of the large Western banks.
Barclays is the first bank to be condemned for manipulation since the creation of the London fix.
The Shanghai Gold Exchange, the most important physical gold trading hub in the world, could quickly open its platform to foreign brokers and gold producers and, thus, confirm its place in the international physical trading space.
China wants to have more influence in determining the price of gold, and the launch of the Shanghai Gold Exchange (SGE) is just the first step.
Fabrice Drouin Ristori
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