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Stand Aside, Brits… The Chinese Are Running the Show Now

It is no secret, and should come as a surprise to no one, that the Chinese have been stockpiling gold and maneuvering to increase their influence in the gold market for decades. They have gone to great lengths to become the largest producer of gold, regardless of the volatile (and debatable) price/cost ratio over the years. Moreover, the Chinese also import a considerable amount of gold, all of which appears to stay within her borders.

By evaluating their production, net import figures and the rapid development of the Shanghai Gold Exchange, it definitely appears that there is a desire to control what many financiers and investors in the West consider a “relic.”

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As such, it is only natural that China’s next target would be the century-old London gold price fix—a monopoly that was once dominated for nearly 100 years by the Rothschild family up until 2004, when British banking firm Barclays took over their chairmanship’s position.

Most anything that an investment bank controls sooner or later becomes toxic—especially something that’s non-transparent and unregulated like the gold price fix—and as sure as the sky is blue Barclays did not disappoint. In 2012, an employee of Barclays Plc tried to rig the gold price to prevent a client from getting paid out on a huge bet he played 12 months prior.

The trader, Daniel Plunkett, was eventually caught, and the entire scandal just added to several ongoing theories and accusations that the gold price is and was being manipulated for years to try and prop up Western fiat currencies.

Whether this was the proverbial final straw for the Chinese, or the fact that China has had a special cultural relationship with gold for thousands of years, is something for historians to ponder. But the current reality is that China is making itself the gold center of the universe at the expense of the West.

No country since the United States after the Bretton Woods Agreement has dominated the gold market quite like China is setting itself up to do. This could be enormously bullish for gold in the future, as well as possibly extremely volatile in the near term.

In any event, the West has dropped the ball and China’s powerful State-owned banking monopoly has picked it up and plans to control the gold bullion market for the foreseeable future.

Many have alluded to China as the leader of the 21st century. Whether this is wholly true remains to be seen. But one thing is for certain, the fact that China is committed to controlling a currency that has been around for thousands of years while governments around the world print, manipulate, and indebt themselves with modern fiat currency should not be easily overlooked.

If you happen to sit in the camp that believes gold is a relic and is on the verge of dropping back down to late 20th century levels, you may want to rethink that position. And maybe even buy a gold coin or two.