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China Flexes Muscles At Shanghai Gold Exchange

January 20th, 2016

gold and silverJeff Nielson:  The New Cold War between West and East has already become a Luke-Warm War , and it threatens to become a full-fledged “hot” war. After years of passively reacting to Western crime and aggression; both China and Russia have shown an increasing tendency to adopt a more proactive stance. On the economic front, China has leaped into the international gold market, suddenly and decisively .

After having purchased no gold on the open market for at least six years; China’s government has now made large, open market purchases of gold every month , for six, consecutive months. This has already totaled roughly 100 tonnes. Ultimately, this is gold which comes out of the warehouses of the Big Bank crime syndicate.

Of equal significance; China is funding these open market purchases with the proceeds from dumping large quantities of its U.S. Treasuries holdings. U.S. Treasuries are worthless paper, available in near-infinite quantities. Gold, as the ultimate monetary metal, is literally “priceless” in comparison to that worthless paper – while its supply is extremely limited. Selling the former in order to buy the latter may not be the banksters’ worst nightmare, but it’s close.

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However; China’s open market purchases of gold are not the only example of China “flexing its muscles” in the gold market. Domestically, China has sought to steadily increase the role of the Shanghai Gold Exchange in the global gold market. It is morphing from being a mere alternative to the paper-fraud markets of London and New York into being a serious rival.

In mid-2014; China announced plans to begin offering three “physical” contracts for gold at the SGE, denominated in renminbi, in amounts of 100 g, 1 kg, and 12.5 kg. The significance of the last, larger number is that this equals the size/denomination of the “London good delivery bars” which are (supposedly) being traded in the Western world.

When we see contracts for the trading of a physical commodity labeled as “physical” contracts, isn’t this redundant? No. Rather, the clear implication is that the “physical” trading of gold at the SGE would be in contrast to the paper trading that takes place in the Western world – where more than 100 “ounces” of paper-called-gold exist for every ounce of actual metal in those fraud markets.

China further stipulated that it was “inviting” Western financial institutions to take part in the trading of these physical contracts. A Reuters article provides the thinking behind sending out such invitations:

“China wants to have more voice in gold prices,” said Jiang Shu, an analyst with Industrial Bank, one of 12 banks allowed to import gold into China. “The international exchange is the first step towards gaining a say in gold pricing.”

“If you don’t allow foreign players to participate in your market actively, or do not push Chinese financial institutions to participate in the international market, then China’s strong gold demand is only a number, not a power,” he said.

The implication is clear: international participation in trading at the SGE enhances the prestige and (perceived) legitimacy of the Exchange, and thus accelerates its rise in status vis-à-vis the exchanges in London and New York. For this reason, it will likely not be a surprise to many readers that Western financial institutions have been less-than-enthusiastic about such participation.

For newer readers, who are not yet familiar with the “role” of Western banks in the West’s ultra-fraudulent bullion markets, it’s really quite simple. These Big Banks are the “hit men” in these markets, who perennially prevent price-discovery (and thus legitimate prices) in global bullion markets, through a variety of forms of illegal manipulation .

One of their favorite methods of market-rigging is through “shorting” these markets, with massive, illegal trading, where the illegality could not be more obvious. How obvious? In 1971; the Hunt Brothers were convicted of “cornering the silver market”, at a time when their total holdings represented less than 20% of available inventories.

Today, the four Big Shorts in the silver market, all Western Big Banks, have “cornered” roughly 80% of the trading on the short side of the market. This means that each of those four, criminal institutions holds a larger concentration in this market than the percentage which earned the Hunt Brothers their criminal conviction.

More to the point; regular readers are fully aware that all of these Western banks are, in fact, nothing but tentacles of one, gigantic, financial behemoth: the One Bank . This single crime syndicate is allowed to permanently hold a short position in the silver market more than four times more concentrated than what U.S. courts have already ruled is illegal.

That’s called a double-standard. There is one set of rules for the Criminals “trading” (illegally) on the short side of the market. Meanwhile, we have another totally opposite set of rules for those individuals/entities looking to engage in honest commerce in the silver market. Put more simply: there are no rules for the Criminals, and (by implication) no rights for the honest traders.

Those are the West’s “bullion markets”: permanent cesspools of financial crime, with the Big Banks holding massively illegal short positions, which are grossly disproportionate in size to short-trading in all other commodity markets. This provides us with one of the reasons for the extreme reluctance of these crooked Big Banks to participate in offering the SGE’s (real) gold contracts.

For any player in any market with a short position; increased “long” trading directly and immediately puts price pressure on any short position in that market. Sitting on the largest (illegal) short positions in the history of human commerce, these Big Banks have little appetite for facilitating the trading of actual bullion at the SGE, to put it mildly.

However, once again, this pulls our focus back to the paper-fraud markets in the West. In the West, for some reason, these same Big Banks have (supposedly) taken an entirely opposite attitude toward being big players on the long side of the market. Indeed, these Big Banks volunteered to act as “custodians” for the largest “bullion funds” in the Western world: the bankers’ notorious bullion-ETF’s.

In legitimate spheres of the bullion world; investors who trade in legitimate bullion funds are required to bear the storage costs for holding that bullion. Thus the unit cost of their holdings in these funds exceeds the “spot” price of the bullion market at that time, by a modest premium, in order to cover those storage costs. Not so, with respect to the Big Banks’ bullion-ETF’s.

The largest of these so-called bullion funds are the SPDR Gold Trust, and the iShares Silver Trust, better known by their market symbols ( GLD and SLV, respectively). The purchasers of units in these funds pay no premium for their “gold” and “silver”. Indeed, they can often purchase their units at a slight discount to the spot price.

If we were to assume that GLD and SLV were legitimate bullion funds, which were being administered for the benefit of unit-holders, then consider what is implied. As custodians; the Bullion Banks would not merely be providing free storage for the long investors entering this market, they would be subsidizing those investors, since the storage costs for the Big Banks, themselves, are greater than zero.

Note further that this is (potentially) an infinite subsidy for long investors in the gold and silver market, since they have pledged to act as custodians (and thus subsidize) any and all investors in these funds. What we are supposed to believe is that these mega-shorts, with short positions in both the gold and silver market which are so large as to be obviously illegal, are also the largest philanthropists on the planet on the long side of the market – offering infinite subsidization for long investors in gold and silver, but only in the Western markets which they control.

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  1. Stan
    January 21st, 2016 at 09:07 | #1

    “Rather, the clear implication is that the “physical” trading of gold at the SGE would be in contrast to the paper trading that takes place in the Western world – where more than 100 “ounces” of paper-called-gold exist for every ounce of actual metal in those fraud markets.”

    Very well said sir. I could not agree more with your statement. The SPDR gold trust (GLD) is a perfect example of this paper gold fraud. Paper gold GLD claims to be fully backed by physical gold bullion but yet it refuses to give retail investors the right to redeem for any of these ‘claimed’ gold bullion. This fact alone would mean GLD shares are nothing more than paper at the end of the day. Furthermore, GLD’s prospectus is chalk full of weasel clauses and legal loopholes that allows the fund to get away without the full physical gold backing. One good example of this is the clause that states GLD has no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this audit loophole. I’ve also verified the following to be true and welcome everyone else to do so:

    “The GLD prospectus fails to specify around how much of GLD’s gold is insured but it does give you this clause “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” As I wanted clarification on this subject, I called GLD’s info line. The GLD representative acted as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors. These representatives behind GLD sure doesn’t seem to be the most honest types. Anyone share a similar experience? Thoughts?”

    “I also recall there was a well documented visit by CNBC’s Bob Pisani to GLD’s vault. This visit was organized by the management behind GLD to prove the existence of GLD’s physical. However, the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not show up on the bar list dated at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”

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