On Sept. 17, the Shanghai Gold Exchange (SGE) announced they were accelerating their launch date for opening a new gold window, with the precious metal platform set to begin buying, selling, and trading gold in the Yuan currency on Sept. 18 instead of on their originally projected start date of Sept. 29.
What makes the SGE unique is that unlike the U.S. controlled Comex, the Chinese equivalent will reside in an international free trade zone and offer customers assurances of protected and secure transactions made without the threat of price manipulation, and with the guarantee of physical delivery.
Forty members of the Exchange including global banks UBS, Goldman Sachs, HSBC and Standard Chartered, will participate in gold trading on the SGE’s international board, trading 11 Yuan denominated physical gold contracts including the large 12.5 kg (400 oz) bar, the ever popular 1 kg bar and a 100 gram contract.
The SGE is also opening a precious metals vaulting facility in the free trade zone with a 1,000 tonne capacity limit.
The most significant, and perhaps most important component of this gold exchange is that it will be facilitated in Yuan and not dollars, which has been the benchmark for price discovery for several decades. And like Russia's new program to allow the sale of its oil in both Yuan and Roubles, the world is quickly experiencing the option to purchase assets and resources outside dollar hegemony, and ushering in the day when global demand for a new singular or basket of currencies is created to replace the U.S. standard that has reigned supreme for more than 40 years.
With so many countries choosing to move away from the dollar as its value has declined sharply over the past two decades, the Yuan is coming into its own to become a strong and viable challenger to replace the reserve currency in the global trade arena. And even as the British Chancellor of the Exchequer George Osborne declared recently that the RMB (Yuan) is looking like it will become the next global reserve currency, that day may be as close as tomorrow as China opens a new international gold window that will strive to wrest price discovery out of the hands of the dollar, and into the dominion of the Yuan.