On May 12, 2015, I reported China’s Silk Road economic project would include gold business. A month prior to that Shanghai Gold Exchange (SGE) chairman Xu Luode had “proposed to integrate gold market development into the strategic development plan of the Silk Road”. Shortly after, in early May it was announced gold mining company Polyus in Russia’s largest gold deposits at Natalka in the Magadan’s Kolyma district would cooperate with China’s largest mining company China National Gold Group Corporation in resource exploration, technical exchanges and materials supply. The first gold business activity along the new Silk Road was reality. Little did we know about any additional plans the Chinese have in store regarding gold and the new Silk Road.
Today we got a glimpse of what could be a global game changer, China is planning to launch “a 100 billion yuan fund led by the SGE, …which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal.” This was just published by news outlet Xinhua in China mainland. Xinhua also published an important article in late 2013 in which it said, “it’s perhaps a good time for the befuddled world to start considering building a de-Americanized world… a self-serving Washington has abused its superpower status and introduced even more chaos into the world by shifting financial risks overseas, instigating regional tensions amid territorial disputes, and fighting unwarranted wars under the cover of outright lies… As a result, the world is still crawling its way out of an economic disaster thanks to the voracious Wall Street elites”. It’s being thought these articles are written indirectly by the Chinese government.
It’s no secret it has been in the interest of the US to remove gold from the international monetary system to leverage their paper money power. Gold still is the US dollar hegemony’s Achilles heel. Is China now attacking the US by quickly strengthening ties with Asian and European countries through the Asian Infrastructure Investment Bank (AIIB), develop the new Silk Road and implementing gold as a financial center piece in these projects? We do know China has been buying A LOT of gold recently, has setup an international gold exchange (SGEI) – to trade gold in renminbi – and is likely setting up a new monetary system that includes gold. In my post PBOC Gold Purchases: Separating Facts from Speculation we could read a few clues from media written in Chinese. Toady we got a clue written by the Chinese in English, for the world to read. From Xinua:
XI’AN, May 23, 2015 (Xinhua) – A gold sector fund involving countries along the Silk Road has been set up in northwest China’s Xi’an City during an ongoing forum on investment and trade this weekend.
The fund, led by Shanghai Gold Exchange (SGE), is expected to raise an estimated 100 billion yuan in three phases.
China is the world’s largest gold producer, and also a major importer and consumer of gold. Among the 65 countries along the routes of the Silk Road Economic Belt, there are numerous Asian countries identified as important reserve bases and consumers of gold.
About 60 countries have invested in the fund, which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal, according to the SGE.
“China does not have a big say in gold pricing because it accounts for a small share of international gold trade,” said Tang Xisheng …
“Therefore, the Chinese government seeks to increase the influence of RMB in gold pricing by opening the domestic gold market to international investors.“
Interesting times. This could be related to the “gold bank guided under the PBOC and led by the China Gold Association (CGA)”, President of the CGA Song Xin was writing about in 2014. From Song:
Establish a Gold bank. We need to establish our gold bank as soon as possible, and enable it to break the barrier between the commodity and monetary world. It can further help us acquire reserves and give us more say and control in the gold market. It may be guided under the PBOC and led by the China Gold Association, involving leading gold industry companies and commercial banks, and it’s business would include: gold pricing (fix), gold financing and leasing, gold-guaranteed payments, gold saving accounts, gold lending, gold production chain financing and issuance and trading of paper gold and other gold investments. This gold bank can then naturally use market-oriented methods to change commodity gold into monetary gold reserves, thus help us increase our strategic gold reserves.
…That is why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan. Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US.
Reading the underlined part, this fits into the Xinhua piece published today.