China's First Gold Exchange Opens for Trade

Diane Monaco dmonaco at pop3.utoledo.edu
Thu Nov 14 08:51:08 PST 2002


At 07:51 AM 11/13/2002 +0530, you wrote:
>Diane Monaco wrote:
>
> > Nice timing too for this market as gold prices begin to rise amidst
> > geopolitical uncertainties and a weakening US dollar. A weaker dollar
> > provides investors, in the rest of the world, an advantage when buying
> > dollar-denominated gold. Also, there is some evidence that the recent US
> > outflows of funds -- in response to the Fed's most recent rate cut --
> > flowed into monetary metal assets like gold.
>
>The trend in gold prices: Will this continue in the medium term, say 3-5
>years?
>
>Ulhas

Ulhas, you pose an interesting question; I only wish I knew the answer. But I suppose in thinking about the medium term it might be a good idea to take a look at the long term first. Since about 1979, gold has been at a $US 300 per ounce or above level, except for the period beginning with the Asian financial crisis, and then followed shortly thereafter by a more significant occurrence, I believe: the selling of gold by the Bank of England and other central banks. In fact, this selling of gold reserves by the central banks was blatant and widely announced and resulted in gold falling below the floor to $US 250 per ounce or so. Central banks of course have successfully engaged in this kind of gold activity in the 1970s; however, it was in a much more clandestine manner -- nothing announced. So, I guess it is all still the case that what happens to gold in the medium term -- and will it continue to stay above the $US 300 per ounce level as it is doing now -- depends on what the central banks do with it.

Anyway, I'm slightly intrigued by the opening of the gold market in a major gold production and consumption region (China), and how that, combined with Hong Kong's market, could really rival the top 3 gold markets in the West. In fact so intrigued am I, that a Chinese student and I are exploring the possible ramifications in an independent study next semester.

Diane



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