Gold market: Pan-Asia Gold Exchange IS a Game-changer

Andrew Maguire’s assertion that China’s Pan-Asia Gold Exchange will wrest power away from the JP Morgan bullion market suppression scheme is already under attack.

Maguire, the so-called “whistleblower” who alerted U.S. authorities of JP Morgan’s bullion market price manipulation scheme and went public in March 2010 with his complaint, told King World News he expects the illegal naked shorts in the gold and silver market will be destroyed and that a true price discovery environment will result of China’s 1.3 billion population becoming empowered to buy the precious metals.

The primary argument against Maguire’s analysis is that markets don’t move price with the addition of the Pan-Asia gold Exchange.

It’s true, markets don’t move price – participants do. But the point Maguire makes has everything to do with the participants having access to the marketplace—hundreds of millions of anxious Chinese, who have so far driven up the price of everything that doesn’t have a dead president stamped it, such as copper, oil, lumber, food and every other commodity.

For 50+ years, starting with Mao Tse Tung, the Chinese were precluded from owning gold. In 2005, that all changed. Beijing understands the importance of the gold market in its efforts to establish the RMB as major reserve currency and the privileges that come with that status.

In the first quarter of 2011, Chinese investors bought 93.5 tons of gold coins and bars. After considering that China’s gold production reached only 340 tons of gold last year, with a consumption rate of 700 tons along with investor demand expected to top 20% per year, the expanded access through the Pan-Asia Gold Exchange to an expanded market will supercharge the public’s participation in the gold market.

Through the Pan-Asia gold Exchange distribution network and introduction of innovative gold products for the Chinese masses—a quite different model from the Shanghai Gold Exchange—the ease of access to market for the most populated country of the globe is Maguire’s point.

Consider the effect on the gold price of 320 million retail customers and 27 million corporate customers who conduct business through a network of 24,000 branches, and who now are able to buy gold through the Internet with a click of a mouse. That’s the network established between the Pan-Asian Exchange and The Agricultural Bank of China. Minimum contracts of only 10 ounces may be purchased, as opposed to the 100-ounce minimum required in Shanghai and Hong Kong.

And the Pan-Asian Gold Exchange goes live this month!

During the CFTC hearings earlier this year, Jeffrey Christian of the CPM Group said he estimates that the London Bullion Management Association (LBMA) has on deposit $153,000 worth of claims for each ounce of physical gold—which calculates to approximately 100 to 1 leverage to actual gold available for delivery.

What if there’s a sudden demand for physical gold, say, from China? Who will deliver it?

Maguire’s conclusion that the shorts operating under protection of the CME should be frightened is entirely appropriate.

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