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One Ounce Gold (Au) currently converts to Y8,000! Set by an Algorithm!

April 15, 2016

As of right now (real-time) the digital price of gold in dollars is $1234. With the exchange rate of the Dollar/Yuan at 6.48 this converts to approximately Y8,000 for one ounce of Au (gold). All global currencies (such as the Yuan) are currently subject to the dollar ‘algorithm’ when gold prices are converted via an exchange rate for an alternative currency (in real-time). This means that the U.S. Dollar is the official ‘price discovery currency’ for all global currencies with respect to the price of gold in real-time. The currency exchange rate right now for Yuan in Dollars is 6.48. One dollar = 6.48 yuans on our currency exchange markets. This means a Yuan price for gold at Y7996 ($1234 x 6.48 = 7996 Yuan). What could happen after April 19 at the Shanghai Gold Exchange if real market demand prevails over the CME Comex/Nymex price discovery mechanism (set within our electronic markets)?

Prior to computer trading, price discovery was via the Open OutCry system! Today’s prices, however, are determined via electronic trading strategies! Who is aware?

If price discovery for the physical metal (Au) is set by supply/demand at the Shanghai Gold Exchange starting April 19, we could witness the price of one ounce Au increase. If the price were to increase to say Y10,000 (say via real supply/demand), then this would convert to $1543/ounce for Au (a new price discovery number). Would the CME Comex/Nymex electronic exchange continue to use their ‘paper’ market to set another price for gold via this digital derivative market? If so, then we could witness two digital ‘prices’ for gold and eventually also silver. We could witness one price set in Shanghai (set by supply/demand) for the physical metal and another price set at the CME Comex/Nymex electronic exchange. We could witness a competition between Shanghai and New York for the price discovery of gold/silver in real-time. Will the CME Group which creates the current gold price continue to have relevance? I don’t think so!

Will the Shanghai Gold Exchange create a price discovery mechanism based upon real Supply/Demand?

What currently happens is that the digital price of gold and silver are created within our electronic Futures Markets. This means that algorithms and robots (via HFT and trading strategies) can influence the digital price for both gold and silver in real-time. All is determined within our computer screens via computer trading strategies. These computer trading strategies have ‘suppressed’ the prices of our precious metals for some 5.5 years. There has not been any real price discovery mechanism for trading physical gold in real-time these past 5.5 years. Computers, algorithms, robots, and uncovered futures contracts (naked shorts) have been the mechanisms for creating price discovery. This has been a rigged and manipulated price discovery mechanism for our precious metals. Will this change on April 19th and after? I hope so! Watch the markets after April 19, 2016, and see what happens at the Shanghai Gold Exchange! I am:

2 Comments leave one →
  1. April 15, 2016 4:35 pm

    don i liked this analysis of the gold fix. i wish you would comment on martin armstrong’s article of 4/15,”china’s coming gold fix 4/19″. i believe its fodder for an entire new essay by you. thanks scott h.


    • April 16, 2016 2:23 pm

      Scott: I don’t think Martin is comprehending the Shanghai Gold Exchange correctly. He says the following: If China even dared to attempt to make gold some absurd price well above the world price, they would be bankrupted in a matter of weeks. Everyone would sell their gold to China and return with dollars and nobody would accept gold at some crazy price in payment for anything. All you would need to do is just wait for the collapse and buy back the gold at the world price. Any attempt by any government to FIX THE PRICE of gold far above the world price is precisely converting gold to FIAT defined as dictating the price disconnected from reality of the free market.

      Comment: What does Martin mean by the World Price? The current ‘cyber price’ is what everyone uses for price discovery. Our electronic markets create our cyber price and we could call this the World Price as everyone converts their gold price via their currency exchange rate (relative to the dollar). China has an exchange rate of 6.48 to the $1.00 and this is the rate which gets used to convert our dollar cyber price to the yuan price. Martin seems confused as his view of a World Price is fantasy. China has a right to trade gold via the Shanghai Exchange using their currency unit the Yuan for price discovery. China will be added to the IMF weighted currency called the SDR in September. This addition to the SDR could give them the option to ‘float’ their currency internationally. China does not need the SGE to ‘float’ their currency. I think Martin’s view is incomplete and/or invalid. D


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