CPDLC. You wrote a few days ago: "But taking a wider view I really do not expect the US$ Gold Price to remain at these levels until mid 2016 because gold liquidity is steadily draining from the LBMA and the upcoming price setting on the Shanghai physical market in (perhaps) April will further wrest price discovery from London and New York."
Likewise, I see no more than a few months (if that) before the manipulation of gold and silver prices by the paper players - Central Banks, Bullion Banks, US Treasury Dept, et al is overtaken by the physical dynamics.
As you say, the Shanghai Gold Exchange fix is due to start up in April which should be the back stop for the ending of the price rigging game on the LBMA and Comex. The players know their game is up and are just trying to limp along till then if their metal stocks hold out. But now it's looking like one or both of the LBMA and Comex could be in a default position much sooner than that ....
Recent headlines:
Comex “Gold” Leverage Skyrockets to a SHOCKING 542:1!
SHOCKING UPDATE: COMEX Registered Gold Inventories Plummet 73% In One Day!
London's LBMA and New York's COMEX Gold Markets In Collapse
Shanghai Gold Exchange fix. from a report by A. Maguire 18/12/2015
The People’s Bank of China has been waiting to bring this on-stream for more than a year now but it's likely to commence in April/16.
The Shanghai Gold Exchange fix will be settled in yuan and involve 15 Chinese banks but also include at least five of the same LBMA banks that rig the London fix. But there is a major difference. These fix prices will represent delivered physical bars without any paper market dilution and most importantly all participating banks will be heavily regulated and unable to spoof or paint the fix as they do now.
There is little choice for the LBMA banks but to comply and be a part of this new fix. Unlike the London fix, the Shanghai Gold Exchange fix will be fully transparent. The People’s Bank of China will be the counterparty to the Shanghai Gold Exchange fix and will be a much more vigilant regulator than the insider-infested round-trippers at the U.S. Commodity Futures Trading Commission have been.
The increasing convertibility of the yuan will shrink any price divergences between the primarily paper-settled unallocated London market and the physically settled Chinese and Asian markets. Mainland and international liquidity providers and takers will have to pay the local price, making the London fix jump to the Shanghai tune, especially as it front-runs the all-important Asian-related LBMA AM fix at 10.30 a.m. Though the yuan is not yet fully convertible, the two fixes will have to exist side by side globally but will set the benchmark global physical price. With the People’s Bank of China having a toehold at the LBMA fix, any divergences will be arbitraged and short sellers will be called for delivery, which will also backwash into the Comex.
Gold priced in yuan in the largest global physical marketplace will make the highly dilutive paper-settled over-the-counter and directly linked Comex markets far less relevant. Given that foreign-exchange gold is a primary counterparty to the strong-dollar policy, (long dollar/ Short unallocated XAU), this is a major shot across the bow of U.S. hegemony and a major blow for the western central planners.
In a liquid physical marketplace, divergences cannot exist as they will be arbitraged. This will have a massive impact on positioning in the multibillion dollar gold and silver derivatives markets. The current derivative structure is anchored in billions of dollars’ worth of underwater cash bets that will have to be reset as these bets are undeliverable when true supply-and-demand fundamentals grab the gold market by the tail.
MML Price at posting:
40.0¢ Sentiment: Buy Disclosure: Held
