Why The Gold Industry Is Packing Up & Leaving Western Nations

Why The Gold Industry Is Packing Up & Leaving Western Nations

[heading]Why The Gold Industry Is Packing Up & Leaving Western Nations[/heading]

Wealth is draining out of western nations, and there’s good reason. Record levels of debt, institutionalized corruption, fraud and so on have left financial markets looking towards the east, and gold is no exception.

A new trend has emerged in the gold market, one which might have implications for an ongoing power shift in global geopolitics. Basically, eastern markets, led by China, want more influence on the gold market. Traditional power center, London, might not be ready to cede power, but does it have a choice? More western nations have little control over precious metals. For instance, record levels of debts preclude the purchase of further gold stockpiles. Palladium is controlled by Russia and the platinum market is in turmoil in South Africa.

China has been particularly active searching for foreign banks and gold producers that are seeking participants in a planned global gold exchange to be based in Shanghai. As the world’s top producer and importer of the metal – approximately 41% of newly mined gold – many individuals, from both the west and east, might find participating in such a new market as viable.

SGE, the world’s biggest physical gold exchange and a state-run bank, has requested bullion banks such as HSBC, Australia and New Zealand Banking Group (ANZ.AZ), Standard Bank (SBKJ.J), Standard Chartered (STAN.L) and Bank of Nova Scotia (BNS.TO) to partake in the proposed exchange.

“China wants to have more voice in gold prices,” said Jiang Shu, an analyst with Industrial Bank, one of the just 12 banks allowed to import gold into China. “The international exchange is the first step towards gaining a say in gold pricing.”

But, China is not the only eastern country looking to change the future of the gold market. Dubai is as well. Outside of Dubai one of the world’s largest gold refineries is in the process of being built. Will it shift the balance of power in the gold market from West to East?

Being constructed for $60 million by Kaloti precious metals, the effort is geared towards bringing more of the gold industry to the east.

“Dubai is already a top global center for gold trading,” Tarek El-Mdaka, chief executive of Kaloti Precious Metals, said in an interview. “The refinery is part of the next stage, making Dubai a top centre for physical gold refining and clearing.”

Dubai gold imports increased to $75 billion in 2014 from $6 billion in 2003, and 40% of the world’s physical gold traded passed through Dubai in 2013. Demand in Asia shows no sign of relenting.

“London needs to be more flexible and recognise the trend,” said Kaloti, whose company also plans to open a gold refinery with an initial annual capacity of 50-75 tonnes in Surinam this August, to tap into business in that region.

A CLEAR TREND

A trend is clear. Global power has shifted away from the US and we now live, in the 21st century, in a more multi-polar world. This is good news, as competition keeps interested parties honest.  Import of gold has increased significantly in Eastern countries like China and Dubai. In 2012 China’s imports of gold from Hong Kong reached 800 tonnes. To put this into perspective, the average monthly import of gold from Kong Kong to China is about 31.75 tonnes or 381 tonnes per year.

The dollar crisis is abetting this. The US’s quantitative easing is quite unique for the globe and many nations are diversifying away from the dollar because they foresee a coming crisis. The gold market is a clear vehicle by which to do this, and many nations – particularly the little-indebted eastern nations – are doing just this.

 

 

 

 

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.