Seeking Alpha

Will Bancroft's  Instablog

Will Bancroft
Send Message
Aside from being Co-Founder and COO, Will regularly contributes to The Real Asset Company’s Research Desk. His passion for politics, philosophy and economics led him to develop a keen interest in Austrian economics, gold and silver. Will holds a BSc Econ Politics from Cardiff University.
My company:
My blog:
View Will Bancroft's Instablogs on:
  • How Is Chinese Gold Investment Affecting The Gold Price?

    Incredible import, demand and consumption figures for gold have thrust China's effect on the gold investment market into the spotlight once more.

    How does this huge Tiger economy effect trends in the price of gold?

    This recent report uncovers the heart of activity at the Shanghai Gold Exchange, showing the growing effect on global gold price discovery.

    Rethinking gold price discovery

    Investors have thought for years that the main centres for gold price discovery were in London and New York, with focus falling on the opaque London Gold Market and the increasingly question COMEX exchange in the Big Apple.

    The growing size of the Shanghai Gold Exchange is bringing competition to this market and disrupting the status quo. This much more physical of gold markets, where 240 tonnes of gold bullion bars were taken delivery of in April compared to a paltry 3 tonnes in New York, is quite different to its dynamics than established and more traditional gold buying markets.

    London and COMEX markets are famous, or infamous, for their fractional nature. Essentially investors could lose confidence in these locations if they think they cannot be guaranteed delivery of their gold bar holdings. Paper gold might not be able to be converted into physical gold bullion.

    Gold fund manager Ned Naylor Leyland has been writing about this structural issue in the gold market for sometime.

    Shanghai lights and gold trading

    In contrast the transparent nature of the Shanghai exchange, with its ability to deliver huge tonnage of the yellow metal, might become an increasingly attractive destination for investors to bring their bids and offers.

    For now the Western market probably do maintain dominance in the setting of gold prices, but China's ravenous appetite for hedges against the dollar based financial system is leading to new and improved gold markets inside China itself.

    Already Western institutions have forged relationships into Chinese exchanges allowing traders to access these markets.

    Only time will tell how quickly China might also usurp the West in this key area of gold trading.

    If at this time 'Mrs Wong', as Max Keiser refers to the 300 million Chinese housewives buying gold, is the main constituent part of retail demand at the Shanghai exchange, she might be joined by Mrs Watanabe, Mrs Smith and Mrs Benz if Western and Japanese retail investors seek better markets for their trading and investment needs.

    How does this fit into the currency wars?

    The Chinese are well aware of their position in the global currency wars. They are being forced to face the downsides they experience within the dollar based financial system and make huge, long-term plans to mititgate them.

    You cannot blame China, no doubt we'd do similar in her position.

    China knows full well she needs to gain a dominant part of the global gold investment and trading market. She has a range of options available to her, including:

    • A gold backed yuan
    • Growing the best wholesale trading markets and exchanges
    • Establishing a wide and robust range of retail investment solutions

    Naturally the Shanghai Gold Exchange features prominently in China's long time plans for gold, currency and financial security.

    We look forward to seeing the SGE bring more and more welcome competition in the market and for gold price discovery.

    Jul 22 6:44 AM | Link | Comment!
  • New Research: The Real Asset Report.

    I've been helping my clever colleague, Jan Skoyles, put together a large research report called The Real Asset Report.

    The Real Asset Report is a detailed look at money, gold, Bitcoin and a range of crucial global trends.

    Highlights include:

    • Bicoin uncovered, with a range of new infographics
    • Commentary and heat map of US states ditching the dollar
    • No holds barred interview with Jim Rickards
    • Global gold trends assessment covering public and private holdings.

    We hope you enjoy the report, and do let us know what you think on Twitter.

    Regards and good investing.

    Apr 13 3:26 AM | Link | Comment!
  • Bitcoin? Bitcon? Or, Bitconfused?

    Bitcoin mania has been sweeping the TV, newspapers and social media recently, as the price of Bitcoin has shot through the roof.

    As the Cyprus situation unfolded, and depositors unusually found themselves in the firing line, demand for gold bullion soared across Europe. At the same time, even more noticably, the price of Bitcoin starting going parabolic.

    Even now a few weeks on we regularly see the price of Bitcoin jumping by more than 20% in a day. The best charts can be found at The world's largest Bitcoin exchange, Mt.Gox, now claims to handle over 80% of Bitcoin trading and has been reporting some stunning numbers.

    In recent months Mt.Gox registrations have surged with 60k in March alone, and a backlog of 14,00 to process as I write this. This exchange executed 420k transactions with a notional value of US$121m last month alone. Not a bad niche market to own for the entrepreneurs behind it.

    Amidst all this Bitcoin clamour it does all feel a bit Tech-bubble 2.0. It is indeed a tiny market, at about one fiftieth the size of the relatively tiny physical silver market, so there is plenty of scope for further capital inflows. It is also true that little leverage is being deployed in this price action, given that the major Bitcoin exchanges do not offer financing and traders participate on a fully-paid up basis.

    We're running an investor poll on Bitcoin, which is certainly dividing opinion. Have your say in the poll here.

    Tags: Bitcoin, Gold, Silver
    Apr 09 10:07 AM | Link | Comment!
Full index of posts »
Latest Followers

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.