27 December 2011

Is PAGE dead on PBOC ban on non-Shanghai gold exchanges?

Mineweb (ex-Reuters) is reporting that "Gold exchanges in China outside of two in Shanghai are to be banned, authorities said in a statement released on Tuesday."

Looks like the much hyped Pan Asia Gold Exchange is dead. Not sure where this leaves those who claimed that it "will ultimately destroy the remaining short positions in both gold and silver".

I will come back to this story but for the moment I want to see how the pumpers and hype merchants spin it, or unspin what they said before.

I also find it interesting that this story breaks at the same time as China Daily reports that "China should further diversify its foreign-exchange portfolio and make more gold purchases when the metal's price dips but is still at a relatively high level, a senior central bank official said on Monday."

What is China's game re gold? How can we weave these two stories into a coherent explanation?

12 comments:

Bosco said...

I think the 2 news fit perfectly.

China wants to hold gold in both public and private hands. However, the mushroomed gold exchanges / brokerages are doing 2 things: 1) diverting investment into paper gold speculation; 2) often scams / frauds that creates bad publicity for gold as an "safe" investment. Clamping down on these actually forces people to play in regulated environment or into physical gold hoarding (you lost some interest definitely).

Bosco said...

Here's a translated version of the actual announcement:

http://translate.google.com/translate?sl=zh-CN&tl=en&js=n&prev=_t&hl=en&ie=UTF-8&layout=2&eotf=1&u=http%3A%2F%2Fwww.cnstock.com%2Findex%2Fgdbb%2F201112%2F1766770.htm&act=url

Bron said...

Thanks for that Bosco, the translation is a bit unclear but most of the key facts seem to be picked up in the news articles.

PAGE was pitched as a non leverage physical exchange, so it will be interesting to see if it is allowed to continue.

Bosco said...

Bron,

The announcement right now is very specific, that all gold trading is limited to the Shanghai exchange. Unless, which I doubt, PAGE can get an authorization from the central gov't (not the current authorization from provincial gov't), it is definitely a no-go at the moment.

Bosco said...

and btw, if you look at the information/pics related to PAGE, one can see the highest ranking officials attending those ceremonies were only from within the Yunan province. Nobody from the central gov't have ever voiced/shown up relating to PAGE. Which, in China, you can imply this is nothing but a small local thingy conjured up by the local gov't wanting to get a share within the growing trading market.

Bron said...

Which may leave those who made a big deal about PAGE with egg on their faces.

I note on PAGE's website they have a quote and photo from Andrew Maguire. The "about" info on the website is scant on who is behind it, which is not a good sign.

Robert LeRoy Parker said...

I don't know jack about page but I doubt anyone will have "egg on their faces" until gold drops below a grand with no disconnect.

At that point i will dip my face in egg.

Larry said...

China is, contrary to naive assumptions, not a monolith. There are competing factions in all arenas and levels.

The Provincial promoters of PAGE tied it into the recenly announced new Five Year Plan, issued by the National government.

The PBOC announcement looked to me like an ambit claim that PAGE should not be allowed to proceed, but they have no authority to prohibit it.

This will be decided behind closed doors at a high level where the factions duke it out to come up with their compromises that let everyone win some and loose some.

PAGE probably won't be up and running as soon as the promoters thought, but it may well get up eventually

Bosco said...

Larry,

"The PBOC announcement looked to me like an ambit claim that PAGE should not be allowed to proceed, but they have no authority to prohibit it."

I am not sure where you get that impression. The announcement is not just from PBoC, it's jointly from 5 central bureaus (PBoC, Police, SAIC, CBRC, and CSRC). I think it is the PAGE that need to obtain permission rather than the other way round.

I agree with your other points though. It's naive to assume there'd be no factions within any big enough interest group. However, judging from what I've seen so far, the PAGE backers do not seem to be especially powerful and well connected.

Anonymous said...

What are the changes for China to encourage its people to stack gold and silver, and when SHTF ... CONFISCATE? Bron?

Anonymous said...

Typo. It's should be chances, not changes

Bron said...

Probably reasonable probability, but I don't think there is any master plan to confiscate at this time - China may just think that what is good for their central bank is good for the citizens. Maybe they are happy to have it also mop up excess savings.