Shanghai Gold Exchange:
Will Serve as Another Means
of Putting Gold Into Chinese Hands
“The golden stars on China’s national flag could soon take on new meaning. We’ve long believed that China wants the yuan to supplant the U.S. dollar as the world’s reserve currency, with the yuan backed by gold tradable at some fixed exchange rate. The reality came closer with the September 18 launch of the Shanghai Gold Exchange,” says Stephen Leeb, editor of The Complete Investor.
“Located in Shanghai’s recently established free-trade zone, the SGE opens yuan-denominated gold trading to the world’s largest financial houses, including Goldman Sachs, UBS, HSBC, and Standard Charter, and should quickly dominate worldwide gold trading activity. The exchange also is operating a warehouse within the free-trade zone to store up to 1,000 tons of the metal, serving as a repository for the entire Southeast Asian region.
“Besides opening China’s formerly closed gold market to foreign capital and steering gold trading to the yuan, the SGE will serve as another means of putting gold into Chinese hands. This will accelerate the already huge flow of gold from West to East. Last year China surpassed India as the largest market for gold, importing nearly 1,126 tons of the metal through Hong Kong. Moreover, additional quantities – the exact amounts are unknown – entered China via other portals. Overall gold import figures became even more opaque last April when imports through Beijing were permitted. The SGE is the next logical step in this progression. Beyond being a huge importer of gold, China also is the world’s biggest gold producer, and it keeps essentially all of what it mines.
“When China succeeds in establishing some version of a new gold standard, it will propel gold prices to new heights. Investors shouldn’t delay establishing positions in the metal; one recommended vehicle is our Growth Portfolio’s SPDR Gold Shares ETF (GLD).”
Editor’s Note: Stephen Leeb is editor of The Complete Investor, P.O. Box 248, Williamsport, PA 17703. 1 year, 12 issues, $199. For a limited time, readers can receive a full one year subscription for only $39. For more information visit www.completeinvestor.com.
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