Gold price rally: is China now in charge?

On the night of today’s Tuesday, the price of gold has already reached prices of $ 1,475. China’s influence on the international gold price seems to be increasing.

Gold price continues to rise

The gold price has risen sharply in recent days. This morning at 8:15 am, the troy ounce of gold on the spot market cost 1,463 US dollars. That was 1.305 euros. Gold price impulses came from the Asian trade again and again. Striking are price jumps after the end of stock market trading in the US. But also in other respects, the influence of Asians on the gold market seems to be increasing, especially that of China.

Gold trading around the clock

Meanwhile, the major trading in gold futures is around the clock. The same applies to the spot trading via FOREX. Here, gold is treated like a currency. The markets are thus increasingly interconnected. And trading activities are increasing every 24 hours. US big banks can trade gold in Shanghai, and Chinese institutions have been involved in Western market activity for quite some time. At the US commodity futures exchange COMEX, trading in gold futures based on the Shanghai gold price is planned for the fourth quarter.

China repels US government bonds

But the Chinese influence goes further. With the recent depreciation of the renminbi (yuan), the price of gold quoted in the Chinese currency has shot up. Within a day, it was up 4.5 percent. And the trade war with the US could cause China to intervene even more in the gold market. In the past few months, Chinese investors have repelled US government bonds. China is the largest foreign creditor of the USA. The country last still held $ 1.1 trillion US Treasury bonds.

China buys gold

And the country’s central bank has been demonstratively covering gold for months. China’s gold reserves have risen by about 74 tonnes since January (China bought so much gold in June!). Later this week, the People’s Bank of China will report changes in its reserves by the end of July. Significantly increased gold holdings would certainly be a show of force against the US. The trade conflict turns into a currency war. And China’s increasing influence on the gold market could also be a problem for the big US bullion banks on Wall Street. They are always positioned on the short side in gold bull markets. A sharp rise in the price of gold increases the risks for these institutions in this enormously leveraged market.