Shanghai's New Futures Exchange Adds Fuel to Gold's Rocket Fuel Ride

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...Do not underestimate this new, bullish, market force. The Chinese have a much more conservative attitude towards gold, honoring its role as the only asset that's not somebody else's obligation...

China takes over the gold market. Since Thursday, Shanghai's new gold futures exchange has added fresh fuel to the gold bull, pushing prices to new all-time highs since trading began. The most active contract touched its daily 10% limit and forward prices indicate a strong expectation that gold will jump the $1,000 barrier soon. Do not underestimate this new, bullish, market force. The Chinese have a much more conservative attitude towards gold, honoring its role as the only asset that's not somebody else's obligation...

Contracts for June delivery hit US$988 an ounce in Shanghai. Spot gold hit US$891 in London afternoon trade yesterday, surpassing the previous high of US$881.10 reached on Tuesday...

"Futures will allow leveraged investment in gold from Chinese investors and speculators," wrote John Reade, a London-based metals analyst at UBS. It is expected that Chinese gold producers will use the market to hedge low-cost exposure to the metal while investors will leverage their holdings to bullion.

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