Challengers to the Price Suppression
The Shanghai Gold Exchange is based upon physical gold & silver, requiring 'futures' shorts to deposit physical metal upfront, which is setting the benchmark for the new gold and silver price exchanges in Hong Kong, Singapore, Dubai and Moscow.
The Shanghai Gold Exchange handles the largest physical bullion trading volume in the world, by a very substantial margin. However, futures contracts are currently restricted to within China only, but that is about to change, as Hong Kong prepares to step into that breach, as it has just been announced that the Hong Kong Gold Exchange will be introducing physically settled CNH and US$ denominated Gold futures contracts. This will be the first time that it will be possible to trade physical gold futures contracts denominated in both CNH and US$ on the same trading platform.
Any entities that wish to issue short futures contracts will have to deposit the physical metal up front with the Hong Kong exchange. The Hong Kong announcement did not make it clear if the other precious metals were included, however, it would be logical for silver futures to be included along with those for Palladium and Platinum.
Interestingly, these Hong Kong futures contracts will be available for trading 16 hours a day, which will overlap both London and New York trading times. It will therefore be possible, for the first time, for traders to take advantage of any appreciable gold and silver price differential between the West and the East through utilising arbitrage.
Pressure on the Paper Gold and Silver Markets
Bear in mind that London and New York's gold (and silver) markets are very predominantly 'paper' markets; particularly New York’s COMEX, which over the last several years has only delivered an average of ~ 50 tonnes of physical gold per annum. This Hong Kong development will place COMEX, GLOBEX and LBMA under added pressure going forward, as physical gold and silver bullion drained from the vaults in the West to meet the very strong demand in the East will only be exacerbated. That trend will only be intensified when, rather than if, the developing gold exchanges in Singapore, Dubai and Moscow follow suit at some time in the future, and as physical gold and silver trading volumes increase.
It seems as if physical supply constraints are gaining traction, and if that is so, then those operating the 'apparent' price suppression scheme may decide that it is preferable to allow gold and silver prices to rise in an orderly manner as in the period 2002 thru April 2011, rather than waiting for the physical demand to outrun the 'readily available' physical bullion supply at these artificially low prices, in which case the increase in the gold and silver prices will very likely be sharp and disorderly.