By obstructing import and export the PBoC greatly amplifies the gold premium or discount on the SGE relative to London. In the past 12 months the PBoC has restricted gold import to curb capital flight and defend the renminbi, resulting in exaggerated SGE premiums. With these interventions the Chinese central bank risks the gold market it supervises from functioning properly, and stagnates internationalization.
Similar to the selfish, me-first attitude China has employed with foreign business investment in China. I think China is like a child, extracting from parents. Soon they will have to realize they are an adult now and be honourable in their dealings with the rest of the world because the rest of the world is quickly figuring out how they took advantage of selfish US CEOs.
When it comes to gold, articles like this one, is right in line with them having to figure things out. The world is onto the manipulation and their exchange will not be taken seriously. So no more making lopsided business deals or exchange manipulation just because it was somehow made legal, unless they think they have some BRICS support to do whatever they please. I think they will find everyone is out for themselves, but at the same time everyone around the world is realizing in some weird way that we are in this together.
I know we both hope you're wrong about China's future dealings. I'm counting on being honourable as the key here. It's very important to the Chinese culture as I understand it, and since they have ambitions about being a player at the global political table, for lack of a better phrasing, hopefully they will understand that they are dealing with peers, not citizens they are meant to govern over. The amount of bilateral meetings with US and other country officials lately, is a positive.
Thank you Jan, for this explanation. This is simply further proof that the idea of a BRICS currency backed by gold is a non-starter. none of the BRICS nations are going to be willing to allow unrestricted outflows of gold from their accounts, hence the gold backing will be empty promises.