On Sept. 18, the Chinese opened a new public gold exchange that will serve as both an alternative and competitor to the Western backed gold market. But unlike the U.S. Comex and London based futures markets, China's Shanghai exchange will be dedicated to cash and carry gold buying and selling, and will accelerate the day when the U.S. no longer controls the spot price of precious metals.
However, an interesting thing occurred on the day before, and the day of, the opening of the Shanghai exchange. Gold prices on the Comex were crushed by the banks and by the Federal Reserve, with massive short positions taking down the spot price by more than 2% from a high of $1238 to its low of $1215. And while this attack on the spot price was taking place in the Western gold markets, China was seeing far more buys than sells on its exchange, and bears the question of why prices fell when there was far more demand than supply occurring in the physical delivery markets?
The graph pattern above repeats itself almost every night. Gold/silver get smashed when the fraudulent Comex paper trading is at its most active and Asia is asleep. The Asians wake up and resume their furious buying. Gold premiums in Shanghai are as high as I’ve seen them in a long time. Silver has been in backwardation all summer. Then, as Asia closes down the metals get hit again, starting in the fraudulent London market. Wash, rinse, repeat.
- Dave Kranzler, Investment Research Dynamics
On a single day last year when the Peoples Bank of China released tons of gold in the form of jewelry and other physical molds, over 10,000 Chinese consumers stood in vast lines just to have the chance to buy the precious metal as a hedge against devaluing currencies.
Comparatively, best estimates by industry analysts predict that only 1-2% of Americans hold physical gold, and place them at or near the bottom in ownership of physical precious metals in the industrialized world. And perhaps this is primarily due to a herd mentality when it comes to investing, where Americans jump from one sector to another as the market creates one bubble after another to prolong an economic boom based on cheap money and quantitative easing.