Bank of China Will Set the Gold Price Benchmark

Bank of China Joins Gold Fix CommitteeThe Bank of China will become the eighth member of an exclusive group that controls the daily price of gold. Many analysts believe the move is part of a broader push into global markets; a concerted effort by the People’s Republic to raise the profile of the yuan. (Source: The Wall Street Journal, June 16, 2015.)

TheLBMA Gold Price benchmark, which replaced the London Gold Fix, is calculated twice daily at 10:30 a.m. and 3:00 p.m. London time. The other auction participants are Barclays, Goldman Sachs, HSBC, JPMorgan Chase, the Bank of Nova Scotia, Societe Generale, and UBS. (Source: The Wall Street Journal, June 16, 2015.)

Growing Chinese Influence

By melding into the global financial system, China will hold greater sway over commodity markets and international affairs. Earlier this year, it set up the Asian Infrastructure Investment Bank, a countervailing force to the American-led World Bank. (Source: The Wall Street Journal, June 8, 2015.)

The United States opposed the new institution, but France, Germany, the U.K., Italy, Australia, India, South Korea, and others all joined. And China will retain veto power as the dominant shareholder, giving it unprecedented global influence. (Source: The Wall Street Journal, June 8, 2015.)

China’s Ultimate Goal

According to The Wall Street Journal, China’s central bank issued a report last week outlining a strategy to become one of the world’s reserve currencies. At present, only the dollar, euro, yen, and the pound sterling hold the reserve status, a designation granted to them by the International Monetary Fund (IMF). By entrenching itself in the international monetary system, China will solidify itself as a global leader. (Source: The Wall Street Journal, June 15, 2015.)

A team from the IMF is in Beijing this week to evaluate the renminbi (the Republic of China’s official currency) as a possible fifth reserve currency. To demonstrate its willingness to integrate with international markets, China plans to make its bond markets more accessible to foreign investors. Chinese firms and local government have rarely been able to issue debt beyond their own borders. Analysts estimate the shift would likely raise the volume of yuan-denominated transactions. (Source: The Wall Street Journal, June 15, 2015.)

Germany and Australia have openly supported China’s bid, but the United States has been unwilling to lend its support unless China significantly opens its economy. (Source: The Wall Street Journal, June 15, 2015.)

Investors: This Could Send Gold Prices Soaring in 2015