How do The Huge Chinese Bullion Banks Move Gold Prices?

By | November 7, 2019

When analysts look deeply at global gold investment markets a huge amount of attention is given to the actions of the famous bullion banks.

The actions of the bullion banks on the London Gold Market and the COMEX futures exchange in New York are dissected by analysts trying to explain market movements and trends in gold prices.

Famous names like JPMorgan, HSBC, Scottia Mocatta and Goldman Sachs are monitored closely as the size of their trading, for themselves or for their clients, is so large it can move markets.

Examples of bullion bank influences

Older gold investors will remember the 1980s and 1990s bear market well, probably holding a range of opinions as to what caused this bear market.

Within these opinions there are some well-made arguments by the like of the late Ferdinand Lips that two key phenomena involving the bullion banks had a marked effect on weakening prices during this era.

Bullion banks and leased gold: by taking leased bullion from central banks and selling it into the market bullion banks made hay for 20 years. This leased metal, whilst earning a paltry interest for the central bank, manifested itself in large selling pressure in the gold market for a number of years.

Bullion banks and over-hedged gold mines: by encouraging gold miners around the world to hedge future production further and further out into the future, these banks were keen to make money from their hedging services, and by over-hedging miners may also have walked lock-step with the bullion banks to keep the price of old yella’ lower than it might have been.
What about the giant Asian bullion banks?

China and Asia’s huge and growing markets are now the focal point for global minded analysts to look into.

Within this white hot Chinese gold buying market there is a new breed of Asian bullion bank, trading on exchanges like the Shanghai Gold Exchange (SGE), growing in size to already rival the likes of JPMorgan.

Comprehensive new research documents the largest trading bank on the SGE, with some familiar Western names just about managing to maintain a large presence there.

However the Chinese banks in this report are worth becoming familiar with, as they will form the core of perhaps the most powerful and fastest growing assortment of bullion banks within the market.

Will the Bank of China and China Agricultural Bank become the JPMorgan and HSBC of 2020’s gold market? Those that invest in gold will need to watch carefully and see.

Will Bancroft is Co-Founder of The Real Asset Company and a notable gold commentator regularly published by the financial media and investment sites online. You might have seen his writings on Stockopedia, Seeking Alpha, Yahoo Finance, the Telegraph and a range of gold investment sites.