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China To Launch A Yuan-Based Gold Fix By Year-End – Dave Kranzler

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TND Guest Contributor:  Dave Kranzler |

China has been quite reserved about commenting on the extreme corruption and fraud which pervades the west hemisphere’s Governments, Central Banks and financial markets, especially as it regards the United States and its flagrant manipulation of the currency and precious metals markets.   But China has been quite active with diversifying its sources of revenues and foreign reserves out of the U.S. dollar and in to alternative currencies and hard assets.

Follow the money:  The Shanghai Gold Exchange has announced that it intends to roll-out a renminbi-denominated fix by the end of the year.  The plan is now being reviewed by the Central Bank (the PBoC) for approval:

Pan Gongsheng, a deputy governor of the People’s Bank of China (PBOC), said the bank would continue to support “speedy and healthy growth of the China gold market” and its internationalisation.

Here’s a link to the report:   China’s Yuan-denominated Gold Fix

I find it quite interesting that China still has not released the highly anticipated update of its current gold reserves.   The blogosphere was rampant that this event would occur this month.

China has an interesting game-theory dilemma.  If it releases a report that shows its current reserves at or near the reported level of U.S. gold reserves (note:  emphasis on “reported”), it risks subverting its massive gold accumulation at current prices because such disclosure would likely cause a parabolic re-set in the global price of gold.

Quite frankly, given the catastrophic level of the paper gold “naked short” position held by the west’s Central Banks and bullion banks, a move like this would cause untenable disruption to global financial markets and commerce.

On the other hand, if China were to release a reserve report that was not significantly greater than its current reported gold reserve of 1,054 tonnes, it would risk losing credibility given the enormous amount of gold flowing into China and being withdrawn from the Shanghai Gold Exchange – not to mention the 400 tonnes of gold per year mined in China that goes completely unaccounted for.

My best guess is that China will continue to play hide and seek with its gold reserves until it feels comfortably hedged from the turmoil that will ensure once the truth is revealed.  This most catastrophic of which will be a collapse in the dollar and a collapse in the value of China’s Treasury holdings.  Please note that Russia is unloading Treasuries quickly in order to side-step this event.

As a former trader, I know that if I were holding China’s cards, I would accumulate a massive position in gold and a massive short in the dollar and then release the truth in shock and awe fashion.  The instantaneous transfer of wealth from the west to the east that will occur when this happens will be spectacular.

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About Dave Kranzler:

Aspen1-dave I spent many years working in various analytic jobs and trading on Wall Street. For nine of those years, I traded junk bonds for Bankers Trust. I have an MBA from the University of Chicago, with a concentration in accounting and finance. My goal is to help people understand and analyze what is really going on in our financial system and economy. You can follow my work and contact me via my website Investment Research Dynamics.  Occasionally, I publish on Seeking Alpha too. As a co-founder and principal of Golden Returns Capital, LLC Mr. Kranzler co-manages the Precious Metals Opportunity Fund, a metals and mining stock investment fund.

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