Shanghai Gold Exchange to start trading today!!, page-42

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20/09/14

20:53

Post #: 14005098
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Originally posted by timber1956 ↑

This discussion is petering out and it may be worth while organising my thoughts into some sort of conclusion...

Siamese Parrot kicked off the thread noting opening of the exchange and predicting fundamental change in the pricing dynamics of the given the basing of trade in physical bullion.

"Let's hope this physical gold exchange where contracts are settled in deliverable physical gold starts to change the dynamics of gold pricing, which is currently dominated by naked short sales of massive amounts of paper backed by nothing gold in London and New York."

Succeed or fail, I don't thing that SGE will make any fundamental changes to the pricing dynamics.

A number of Western banks have committed to participate in the exchange, but none of them have withdrawn for their participation in COMEX, which determines the global USD price of gold.

My view is that the banks will integrate their trades on SGE into their global books. In the near future, the participating banks gold trading risk reporting will have COMEX futures, physical long and short, spot deferred, swaps, forwards, ETOs, OTC options, Swaptions, ... and SGE (long and short) all in the same sensitivity matrix, all netted back to a single net spot equivalent, which is their global position.

This collective mind set will produce SGE price action that - with variations attributable to shifts in the Yuan-USD spot - will mirror COMEX.

Siamese Parrot is going to be disappointed. If COMEX pricing is manipulated (I don't think it is), those price distortions will be reflected on SGE pricing. Nothing is going to change.

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Pretty much spot on I would say Timber. When Tocom was a large player in the gold market, quite a large arbitrage opened up at times, the highest I remember was around $11/toz so if the same happens here it will create different price pressures at times. Mostly it will just offer better liquidity in the Asian timezone, but also I would imagine being Asian trading, more buy side interest as well.
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0 Great analysis

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