Why Might China and Russia Create Their Own Gold Market?

Gold has been used as a form of currency for centuries now and is still seen as a solid marker of a country’s wealth. For decades the COMEX (commodity exchange) gold futures market has been run from New York and its over-the-counter market from London, controlled by some of the world’s largest and most powerful banks.

These prices and values are mostly adhered to across the globe but can be viewed as leaning heavily towards Western bias. There has been recent speculation that China (with Russia’s backing) may be setting up to create their own separate gold market. But why?

Increase Power

There has been plenty of conjecture surrounding China’s gold reserves over the past few years, with many predicting the world’s most populous nation was building up a huge stockpile. This year, to comply with the IMF’s plans to include the Chinese Yuan in its special drawing rights alongside the Dollar, Yen and Euro they released gold holding information.

The amount wasn’t as high as many predicted yet the country is still intent on increasing its gold holdings to help back up and strengthen their currency. Both China and Russia have a long history of competing with the USA and improving their standing in the gold market is just another way to show their power.

Weaken the US Dollar

A further way to effectively beat the USA at their own game, China and Russia also might want to start their own gold market in order to break the world’s dependency on the US Dollar. The nation has already unexpectedly devalued the Yuan twice in two days to bring it down to a closer level so its exporters can compete on the international front.

The reliance on the US Dollar is viewed as creating a monopoly on the market and as two of the other largest and rising powers isolated from the West, it is little surprise China and Russia want to break the dominance.

Avoid Scandal

Part of the problem China and Russia see in the current and reportedly undervalued gold market is that some of the biggest players behind the scenes have been involved in large-scale scandals and corruption, such as Barclays and HSBC. Rather than protesting and raising further complaints, they could be setting out to create a new gold market which isn’t under strong control from global banks. The exact powers behind this new market remain unclear but both the Chinese and Russian governments are likely to exert plenty of influence.

Maintain Strength in Numbers

China’s supposed plans already have the backing of Russia which could help turn it into a reality. They are sure to get the support of many more nations in the area due to the new Silk Road and Russia’s Eurasian Economic Union projects.

These are designed to help the gold backing of the currencies for countries along the Silk Road. Avoiding Washington’s currency wars and being central to the world’s largest and fastest growing economic space, if successful there seems a real opportunity for China and Russia to create their own gold market, breaking away from the US and the West’s influence.