Sunday, December 3, 2017

Expectations grow for Russia and China to establish alternative gold pricing as BRICS forge new gold trade alliance

Most precious metal analysts and owners of gold had expected that China would challenge London and New York's long standing control over the gold price when they opened the Shanghai Gold Exchange in 2015.  However the price difference between the two markets has only been about $25 over spot on a few occasions, which really wasn't enough to force the expected arbitrage which would have siphoned gold away from the West, and into China's markets.

Inevitably this may soon change as four of the world's largest gold producers are in the process of collaborating on a new gold trade alliance from which they are expected to create a totally new form of gold pricing to challenge the London and New York paper markets.

Since Russia, China, India, Brazil & South Africa are all either large producers or consumers of gold, or both, it is highly likely that the BRICS bloc they constitute could focus its cross-border gold trading network on trading physical gold. 
Gold pricing benchmarks from such a system would be based on physical gold transactions, which is a departure from the way the international gold price is currently established. 
Such a system would also be a threat to “gold” trading markets in London and New York. The London Over-the-Counter (OTC) and the New York COMEX futures exchange currently set the international gold price. 
OTC and COMEX are really trading synthetic derivatives on gold, and are completely detached from the physical gold market. In London, the derivative is fractionally-backed unallocated gold positions which are predominantly cash-settled. In New York the derivative is exchange-traded gold future contracts which are predominantly cash-settled and backed by very little real gold. 
The major gold producers Russia, China and other BRICS nations could change the way the international gold prices are set currently - in a synthetic trading environment which has very little to do with the physical gold market. – Russia Today


Why BRICS didn't use the opportunity to set the gold price using Shanghai Gold Exchange? When will they set the gold price by their gold in posession. What is the primary factor they change the policy toward the gold price?

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