Money Market Guru – The Gold Bull Market Has Just Been Born – The Bullion Banks are the financial entities that control the price of gold by selling futures contracts, i.e. “paper gold”, that promise to provide gold at a certain price, to speculators who buy the contracts, and who only wish to make a profit in Dollars on their bets that the price of gold will rise, and do not intend to take delivery of physical gold..Sometimes the speculators win some Dollars, but the vast majority are perpetual losers, because the Bullion Banks can move the price down at any moment and clear out the speculators who were “long” gold.
This game has been going on for years and years..I suppose that the Bullion Banks are not going to want to accept Yuan, in exchange for the delivery of physical gold. They will first convert their Yuan into Dollars, and the only likely provider of Dollars will have to be the Bank of China, and which, by the way, in any case desires to reduce its Dollar holdings. Thus the Bullion Banks will offer Dollars for gold.
This operation kills two birds with one stone: the oil exporters get their gold from London and China reduces its dollar holdings, which they wish to do.. As I see it, here is where the fun begins.. First, the amount of gold which the Bullion Banks can provide will put a very unusual strain upon them.
The Bullion Banks are accustomed to control de price of “paper gold” in such a way that they make it extremely difficult for the holders of “paper gold” contracts to obtain delivery of physical gold.. However, as the Chinese scheme comes into operation, this situation will change: a new purchaser of large amounts of physical gold has come upon the scene. A very upsetting development for the Bullion Banks, never before seen by any of the managers of those banks!