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This exchange is offering a new international-facing allocated ‘Spot’ Gold and Silver contract, with an 8am Beijing-time ‘fix’. The fix will only involve Chinese Banks; indeed the owners and members of the exchange are in no way related to the western banks that dominate the existing Spot and Futures Precious Metals markets. P.A.G.E. is launching in Q4 2011 a new Spot Precious Metals contract to challenge the emaciated LBMA ‘loco London’ system. International investors will now be able to buy allocated and, crucially, Rmb-denominated ‘Spot’ Gold and Silver contracts. The importance of this cannot be overstated. The Renminbi will be accessible to international investors through this exchange, but in a controlled fashion - using Gold as a synthetic choke on demand for the currency. By buying an Rmb Gold contract on P.A.G.E. and selling the equivalent $ denominated contract elsewhere, investors will be left with Rmb exposure. One would imagine that the incentive to own Rmb in the present climate is by inference likely to lead to a whole lot of demand for Gold contracts through this new exchange. Add to that the real demand for allocated Gold that will migrate across from the existing Spot market and you are looking at something that looks sure to have major implications for the Precious Metals market.
Historically the emergence of new Gold and Silver exchanges is met with a collective yawn. The reason for this is that there has never before been any expectation that new exchanges could/would affect the price discovery mechanism. Each new exchange was effectively an extension of the status quo. The mainstream has become dissociated with regard to this issue of price discovery. Many assume that Precious Metals prices are discovered in the healthy way one would normally expect - the body of the market being the 'real' Spot market, where the forces of supply and demand meet, with a small tail wagging merrily away in the form of a futures market (see the Jack Russell illustration). In Gold and Silver the size of the Spot market is ten or more times that of the futures market, so the use of a dog as an analogy holds up in scale terms. The current price discovery mechanism, however, as expressed by my Basset Hound illustration, works instead as follows:
The body of the dog (the Spot market) has become the plaything of its ‘tail’. Rather than the dog wagging its tail, the dog is being wagged BY the tail. This is achievable because the actors wagging the dog by its tail are some of the same LBMA (London Bullion Market Association) members that effectively make up the body of the dog. The LBMA system (aka ‘loco London’) has held sway beyond living memory and countless nations rely on the system for both price discovery and storage/custody. This system has not only allowed itself to be corrupted by fractionalisation, it is clear that the body of the dog actually welcomes being wagged, for fear of the repercussions of being caught short were it not! The ‘spot’ dog has been reduced to shell of its former self, so much so that even apologists for the status quo admit that the ‘spot’ market has around 100 paper claims outstanding to each physical bar. At any cost the existing mechanism will resist delivery, which is what makes the recent demand by Hugo Chavez to repatriate Venezuelan Gold reserves so interesting. This move towards delivery by the Venezuela leader plays into the same important dynamic as the Pan Asia Gold Exchange.
My contention is that this new exchange represents a far bigger challenge to the hegemony of the existing bullion banking system and it price discovery mechanism than most realise. Given the choice between being the unallocated and unsecured creditor of a fractionalized LBMA market or holding title to deliverable and allocated bars within the P.A.G.E. system I anticipate much of the ‘loco London’ business will migrate east, lured by the twin benefits of certainty of outright ownership and long-awaited international market access to Renminbi.
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What are the consequences when PAGE opens for international business in June 2012?
Internationalization of Renminbi (RMB)
FIRST, it will be the internationalization of the use of Renminbi, which will eventually replace the US dollar as an international reserve currency. This will further help promote the use of the Renminbi in the international arena and also help reduce the monopoly or dependence on the US dollar in the trading of precious metals. Since all trades in PAGE are denominated in RMB, a purchase by an international investor will initiate the buying of RMB and hence diversifying out of the dollar.
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Precious Metals Manipulation
SECOND, currently the gold and silver prices are highly manipulated. As we know, gold all along had been the arch rival of ‘fiat currency’. What happens to fiat currencies when people start converting all their paper currencies to gold? That will be the end of the paper currency regime. Hence the authorities will do whatever they can to suppress the true value of gold so as to make it less attractive than ‘fiat currency’ even though most of their value had already been debased by more than 95%.
This is because in a fully or partially Gold Backed economy, the authorities cannot increase the money supply of the economy by the simple act of Quantitative Easing or ‘Money Printing’ because any increase in the Money Supply had to be backed by the same amount of Gold. Hence any government without the ability to increase its money supply at its whim and fancy will not be able to monetize its debts and ‘Pump Prime’ its economy..
At the moment, in order to influence the Gold price downwards, all that needs to be done by the authorities in LBMA and COMEX , is to raise the margin requirements. Consequently, by raising the margin, traders who are unable to fulfill the margin calls will have to liquidate some of their positions. As a result, selling begets selling and this will further push the price of the metal lower which again will initiate another round of selling. This will go on until the price discovery rebalances due to the supply and demand will eventually be reached or what we call the equilibrium price.
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End of manipulation of Precious Metals?
THIRD, when the PAGE comes online in June 2012, authorities at LBMA and COMEX will find that they can no longer manipulate the gold price by raising the margin requirements of the gold contracts without the agreement of the Chinese at the other side of the Pacific
In other words there will be a ‘sea change’ in the price discovery of gold because gold will soon be traded in a more transparent and level playing field. In the past the losers are mostly the small and uninformed investors who invested their honest and hard earned money. So, with the PAGE, it will in a way help regularize the price of Gold.
The interesting point is what will happen to the price of Gold when LBMA and COMEX raised the margin requirement but on the other side the Chinese refuses to follow suit? This will cause a differential in the pricing of gold at both ends. Gold will be cheaper in the US and Europe due to the selling pressure from margin calls while on the other end it will be more expensive relative to the West.
Eventually due to the price differentials, the supply and demand factors will work its way through the markets and the eventually the price of gold will converge or rather reach an equilibrium. Hence, it will be much more difficult for the powers to be to manipulate the gold market.
Leverage and the end of COMEX and LBMA
FOURTH, by now most of us will know that the leverage of both the LBMA and COMEX are more than 30 to 1. On the other end, the Chinese PAGE is 100% back by physical gold and it is guaranteed by the Chinese government. Delivery of the physical gold will be made as effortless as possible because the contracts are in the actual name of the purchaser and the delivery cost for a 10 ounce mini gold bar will initially be price as little as RMB 332.
Currently both the LBMA and COMEX are controlled by the banks. ETFs like GLD are run by HSBC while the SLV is run by JPMorgan. These ETFs are back mostly by paper and they are leverage by up to 30 times. That means that each transaction is backed by less than 4% in physical bullion.
Eventually the Chinese system will put an end to such fractional practice because it is back by 1 to 1 and this means for every contract they sell they will allocate an equal amount of physical bullion to back it up. This process is called allocated gold and unlike the unallocated gold or paper backed being used by other exchanges. If investors realized that if they are able to get physical delivery of the bullions in this case through PAGE, then who is going to do business with those fraudsters, criminal bankers and ponzi scheme operators in New York and London?
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Wealth transfer from West to East
FIFTH, there will be a large migration of investors from to West to the East upon the discovery that PAGE is 100% back by physical gold and contracts can easily be converted to physical delivery upon maturity. When that time arrives, the price of gold will be fully reflected to its true value and will ‘go through the roof’. Hence, it will be the end of an era where the price of gold is determined by ‘paper gold’ and eventually it will be determined by what it should be and that is ‘physical gold’ and the real market forces of supply and demand.
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By establishing the PAGE, the Chinese authorities also hope to establish an over the counter gold market. Each morning at 8.00am, the price of gold will be set by six major Chinese banks which include the ‘Big Four’, namely Bank of China, The China Construction Bank, The Industrial and Commercial Bank of China and the Agriculture Bank of China.
Instead of letting the LBMA and COMEX setting the price of gold, the Chinese will have the upper hand due to the time differences. As we know ‘The Sun rises in the East and sets in the West’, hence by setting the opening price of gold to be traded in the morning, the Chinese indirectly sets the ‘benchmark trading price’ of the day.
Of course, one might argue that syndicates in the west may have the last say on the price and lower it at the close of trading but this will now have to backed by physical delivery if eastern purchases continue.
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http://kingworldnews.com/kingworldn...re_-_US_Entity_Interferes_in_Gold_Market.htmlWhistleblower Maguire - US Entity Interferes in Gold Market
This morning, in an exclusive interview, London whistleblower Andrew Maguire told King World News that the launch of a physical gold and silver exchange in China was interfered with and subsequently killed by a New York based entity with very powerful Chinese connections. Maguire also said Wednesday’s smash in gold and silver was blatant manipulation. Here is what Maguire had to say about the situation: “Well, Eric, it couldn’t have been more blatant (intervention in the gold market) could it? Talk about not worrying about hiding your footprints. This was obviously sanctioned somewhere at a higher level because the amounts of contracts, paper contracts that hit the market, all at once, within seconds of each other, this was not normal trading.”
Andrew Maguire continues:
“This (manipulation) was 100% to protect resistance levels that were about to be breached. However, I don’t think for a minute this has fooled anybody. Anyone in the physical market was waiting for something like this. You only have to have enough of the weak money in there and sure enough they will flush it out.
They (commercials) have been meeting these guys (futures buyers) head on, one for one, short for long, for the last couple of weeks. We’ve been seeing it build up and all they (commercials) have done is cash it in....
“We were seeing massive order flows. We were seeing every single bid being hit. The offers were just massive. I mean we were seeing 10’s and 20 thousand contracts at a time being unloaded by single individuals.
This would be the agents that control the markets. I don’t believe for a minute it was genuine selling. This was 100% paper orchestrated selling and it had nothing to do with the physical market whatsoever. They came in with massive sell orders, creating absolute panic in the marketplace.”
Maguire added some breaking news for KWN readers and listeners: “I’d like to briefly remind King World News listeners just what PAGE (the Pan Asian Gold Exchange) was going to be. This was going to be a Chinese Exchange that was to completely change the way gold and silver trade globally.
If you recall from our previous interview, it posed an immediate threat to the current fractional reserve bullion banking system. It was the competition of a brand new fully allocated gold and silver contract being pitched up against unbacked paper contracts. It’s not a stretch to imagine what a threat these contracts posed to the bullion banks.
The whole thing was killed and we recently found out how PAGE was interfered with. Within hours of our King World News interview last July, I mean you sure get some hits on your show, Eric, the interference stemmed out of a New York based entity with very strong Chinese relationships. It delayed it enough to kill it and it was killed.
China has recently been taking back control of all of the regional gold exchanges. But it’s more of a bullish thing that’s happening here. I think the Chinese are actually formalizing a proper RMB/Gold relationship, once the new government is in place.
I want to get to the good news. The original people behind the international PAGE contract, they stepped aside from PAGE when it ran into this interference (from the New York based entity). They moved to set up their own dedicated international exchange.
It’s been in the works, quietly, for many months now and we will soon be able to announce the first official trading day. This is a game changer, Eric. There are just two of these bullion banks that control almost 95% of all precious metals derivatives, so you can only imagine how welcome this new competition is going to be.
Now the LBMA and the COMEX based bullion banks, they are already defending what is really a growing and unsustainable underwater naked short position in gold and silver. That’s why we see the kind of antics we saw on Wednesday.
So things are about to change, Eric. This new competition will give naked short holders a heck of a lot to think about. This is a bombshell.”
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Ned states that the new Asian silver exchange he is working alongside Andrew Maguire to launch (which has been kept tightly under wraps up to this point to prevent western banking interests from derailing the launch as happened with the PAGE) will trade 1:1 fully allocated silver contracts, and will suck physical metal out of the LBMA system.
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When asked by The Doc how long gold futures prices can continue to decline in the face of massive physical buying of gold Ned replied:
Actually I have a little bit of data which may be of interest. I know you’re aware I’ve been involved with the guys who were originally behind what was the Pan Asian Gold Exchange (PAGE), and the new silver exchange which they’re setting up which is in progress at the moment.
Something came out the discussion I had with them the other day which is very interesting. One of the guys I was talking to- an individual from one of the main 5 Chinese banks, and they were talking about the demand within the country for the two metals. Something very interesting came up, which is they have these gold and silver backed savings accounts in China, in fact all of the banks have these offerings.
The demand for them is just extraordinary! If you extrapolate the demand from this one bank across the other 4 majors, you’re talking a billion ounces of silver demand last year, and 100 million ounces of gold demand! Now of course what’s coming as the next comment is the thing that won’t surprise you, which is that the guy did confirm that yes, they don’t actually physically buy any of that metal- effectively it’s just offset 1 for 1 in the unallocated spot or futures markets- I’m not sure exactly which mechanism is used by those banks.
But it’s just amazing to see all this real demand for real metal just feeding into this system whereby unallocated is fine until it’s not, and in due course that will be the case!
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Oh my. Thanks for the updates sa. If the silver exchange rolls out as NNL forsees, I would expect the GSR to plummet as silver breaks it's paper shackles.
MCX to launch two new contracts ‐ Silver 1000 and Kapasia Khalli (Cotton Seed Oil Cake)
- Silver 1000 – a 1 Kg deliverable contract with New Delhi as the base delivery centre
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Mumbai, September 26, 2012: Multi Commodity Exchange of India Ltd (MCX) will offer futures trading in two new contracts - Silver 1000 and cotton seed oil cake or Kapasia Khalli (as it is popularly called in Hindi), from tomorrow, September 27, 2012.
Silver 1000 is a first of its kind innovative deliverable 1 kg silver contract with New Delhi as the base delivery centre. With New Delhi being one of the largest consumers of silver in India, this contract will cater to the needs of small jewellers and retail investors, who wish to take physical delivery of 1 kg silver bar in demat or physical form.
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Mr. Shreekant Javalgekar, MD & CEO, MCX said: “MCX’s contracts have always tried to meet the varied needs of all the stakeholders of a commodity’s value chain. The Silver 1000 contract is a unique contract that will go a long way in meeting the needs of physical market participants and retail investors as it will enable them to take delivery of 1 kg silver bar at lower margins as compared to the hitherto 30 kg bars. With the festive season fast approaching, this contract is an ideal offering from the Exchange to the market participants.
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About MCX:
Located in Mumbai, MCX (www.mcxindia.com) is India’s first listed, demutualised nationwide electronic commodity futures exchange with permanent recognition from the Government of India. MCX offers the benefit of fair price discovery and price risk management to the commodity market ecosystem. Various commodities across segments are traded on MCX. These include bullion, energy, metals and agri commodities.
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Leading commodity bourse MCX today said its new one-kg silver contract has clocked a record delivery of 1,010 kg silver bars.
The Silver 1000, a monthly contract launched by Multi Commodity Exchange of India Ltd (MCX) on September 27, is a first of its kind deliverable 1 kg silver contract with New Delhi as the base delivery centre.The exchange said in a statement that the contract has been receiving impressive response from market participants, especially small investors located in North India.
The contract witnessed an average daily open interest of 1,516 lots, of which 1010 kg of kilo bar was delivered, with 66% of the open position resulted in delivery.
Commending on the record volumes, MCX Managing Director and CEO Shreekant Javalgekar said that MCX is the world's first exchange to launch a kilo-bar deliverable contract in silver.
"The open interest witnessed by Silver 1000 contract demonstrates the commitment and conviction of the market participants in it," he said.
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NNL said:... they are slowly getting there after some more red tape got in the way.
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