The Potential for Another Chinese Gold Rally
A few weeks ago, an analysis was made regarding the possibility of another rally in gold driven by China, which could rapidly push prices to $3,000. This theory was based on the fact that China's futures traders were the main catalyst behind gold's dramatic $400 increase this past spring. However, these traders had been inactive for the past five months as the yuan price of gold remained stagnant. It was suggested that a technical breakout in the yuan price of gold could spark a resurgence similar to the powerful rally witnessed in the spring. Since that suggestion, there has been a close watch for a breakout in the yuan price of gold—and it seems that time has come.
An Overview of the Shanghai Futures Exchange Gold Futures
The Shanghai Futures Exchange gold futures, which were the primary catalyst behind the gold frenzy in March and April, have been fluctuating within a well-defined trading range since the April peak. However, there has recently been a technical breakout as Chinese traders returned from the Mid-Autumn Festival, which had closed the country’s financial markets for three days. Although the breakout has been mild so far, with lukewarm trading volume, there’s significant potential for it to gain momentum—especially as volume continues to pick up after a pause earlier this month.
The International Spot Price of Gold in Yuan
The international spot price of gold in yuan (which is different from the mainland China gold price) had also been trading within a well-defined range since April. Its recent breakout lends further credibility to the breakout seen in Shanghai Futures Exchange gold futures.
The U.S. Dollar Price of Gold
The U.S. dollar price of gold has also been on a strong upward trend, breaking through two key resistance levels in the past month and a half.
The Chinese Speculators Super-Charge Gold Rally
An April Financial Times article titled "Chinese Speculators Super-Charge Gold Rally " provided a compelling explanation of the gold price surge this past spring. The article highlighted how trading volume in Shanghai gold futures had surged by 400%, propelling gold prices to record highs.
Additional Evidence of Chinese Gold Trading Frenzy
Additional evidence of the Chinese gold trading frenzy earlier this year is visible in the chart of open interest in Shanghai gold futures.
As quoted by the World Gold Council’s chief market strategist John Reade in the Financial Times:
“Chinese speculators have really grabbed gold by the throat.”
“Emerging markets have been the biggest end consumers for decades but they haven’t been able to exert pricing power because of fast money in the west. Now, we are getting to the stage where speculative money in emerging markets can exert pricing power .”
The Future of Shanghai Gold Futures
Now that Shanghai gold futures broke out of its trading range, it is likely to follow what technical analysts call a “measured move ,” which is when a rally after a consolidation pattern is projected to rise the same number of points as the rally that preceded the consolidation pattern. According to that principle, gold is likely to reach approximately $3,000 in just a couple months after breaking out! In case that sounds preposterous, that is only a 12.8% move from here.
In Conclusion: The Potential for Another China-Driven Gold Mania
In conclusion, all signs point to the potential for another China-driven gold mania similar to the one that propelled prices earlier this year. The breakout of Shanghai Futures Exchange gold futures from their trading range, coupled with the rising price of gold in most major currencies, suggest that speculative fervor could soon return with full force. The strong likelihood of a measured move indicates that gold could quickly reach the $3,000 mark, fueled by renewed interest from Chinese traders. As the market dynamics shift, the influence of emerging market speculators on global gold prices is becoming increasingly apparent, setting the stage for what could be a dramatic surge in the months ahead.
Bottom Line
This analysis presents a compelling case for another potential gold rally driven by China. The breakout in the yuan price of gold and the Shanghai Futures Exchange gold futures, along with the rising price of gold in most major currencies, suggests a return of speculative fervor. The potential for gold to reach the $3,000 mark, driven by renewed interest from Chinese traders, is an intriguing prospect. As market dynamics shift, the influence of emerging market speculators on global gold prices is becoming increasingly apparent. What are your thoughts on this? Do you see another gold rally on the horizon? Share this article with your friends and let us know your thoughts. Remember, you can sign up for the Daily Briefing, which is every day at 6pm.
The Potential for Another Chinese Gold Rally
A few weeks ago, an analysis was made regarding the possibility of another rally in gold driven by China, which could rapidly push prices to $3,000. This theory was based on the fact that China's futures traders were the main catalyst behind gold's dramatic $400 increase this past spring. However, these traders had been inactive for the past five months as the yuan price of gold remained stagnant. It was suggested that a technical breakout in the yuan price of gold could spark a resurgence similar to the powerful rally witnessed in the spring. Since that suggestion, there has been a close watch for a breakout in the yuan price of gold—and it seems that time has come.
An Overview of the Shanghai Futures Exchange Gold Futures
The Shanghai Futures Exchange gold futures, which were the primary catalyst behind the gold frenzy in March and April, have been fluctuating within a well-defined trading range since the April peak. However, there has recently been a technical breakout as Chinese traders returned from the Mid-Autumn Festival, which had closed the country’s financial markets for three days. Although the breakout has been mild so far, with lukewarm trading volume, there’s significant potential for it to gain momentum—especially as volume continues to pick up after a pause earlier this month.
The International Spot Price of Gold in Yuan
The international spot price of gold in yuan (which is different from the mainland China gold price) had also been trading within a well-defined range since April. Its recent breakout lends further credibility to the breakout seen in Shanghai Futures Exchange gold futures.
The U.S. Dollar Price of Gold
The U.S. dollar price of gold has also been on a strong upward trend, breaking through two key resistance levels in the past month and a half.
The Chinese Speculators Super-Charge Gold Rally
An April Financial Times article titled "Chinese Speculators Super-Charge Gold Rally " provided a compelling explanation of the gold price surge this past spring. The article highlighted how trading volume in Shanghai gold futures had surged by 400%, propelling gold prices to record highs.
Additional Evidence of Chinese Gold Trading Frenzy
Additional evidence of the Chinese gold trading frenzy earlier this year is visible in the chart of open interest in Shanghai gold futures.
As quoted by the World Gold Council’s chief market strategist John Reade in the Financial Times:
“Chinese speculators have really grabbed gold by the throat.”
“Emerging markets have been the biggest end consumers for decades but they haven’t been able to exert pricing power because of fast money in the west. Now, we are getting to the stage where speculative money in emerging markets can exert pricing power .”
The Future of Shanghai Gold Futures
Now that Shanghai gold futures broke out of its trading range, it is likely to follow what technical analysts call a “measured move ,” which is when a rally after a consolidation pattern is projected to rise the same number of points as the rally that preceded the consolidation pattern. According to that principle, gold is likely to reach approximately $3,000 in just a couple months after breaking out! In case that sounds preposterous, that is only a 12.8% move from here.
In Conclusion: The Potential for Another China-Driven Gold Mania
In conclusion, all signs point to the potential for another China-driven gold mania similar to the one that propelled prices earlier this year. The breakout of Shanghai Futures Exchange gold futures from their trading range, coupled with the rising price of gold in most major currencies, suggest that speculative fervor could soon return with full force. The strong likelihood of a measured move indicates that gold could quickly reach the $3,000 mark, fueled by renewed interest from Chinese traders. As the market dynamics shift, the influence of emerging market speculators on global gold prices is becoming increasingly apparent, setting the stage for what could be a dramatic surge in the months ahead.
Bottom Line
This analysis presents a compelling case for another potential gold rally driven by China. The breakout in the yuan price of gold and the Shanghai Futures Exchange gold futures, along with the rising price of gold in most major currencies, suggests a return of speculative fervor. The potential for gold to reach the $3,000 mark, driven by renewed interest from Chinese traders, is an intriguing prospect. As market dynamics shift, the influence of emerging market speculators on global gold prices is becoming increasingly apparent. What are your thoughts on this? Do you see another gold rally on the horizon? Share this article with your friends and let us know your thoughts. Remember, you can sign up for the Daily Briefing, which is every day at 6pm.
