A lot of things are changing behind the scenes of the gold market. Some expect this to yield a very bearish period for the world’s leading precious metal, even though the overall changes will benefit everyone on this planet in the long run.
Major Changes for the Gold Sector
For the past several decades, the gold industry has been dominated by central banks, private banks, and wealthy families. Although this has not hindered the growth rate of adoption for this precious metal, it is not a sustainable situation either. Something will need to change sooner rather than later, and it appears that these changes are now upon us.
The first bit of news is how Mocatta is shutting down. For a lengthy period of time, Mocatta – an outfit set up by Scotiabank – has been considered to be the largest bullion dealer. In theory, this will leave a major void waiting to be filled. At the same time, it creates ample opportunities for others to step up, and perhaps do a better job in the process.
Secondly, it would appear that JPMorgan is rethinking its position in the gold market as well. To be more specific, the leading American bullion bank isn’t too keen on taking on new counterparties at this time. It is unclear what has influenced this decision, but the approach may not change for some time to come.
Third, it appears as if HSBC is still recovering from the March market madness. The bank’s gold trading book took a serious beating earlier this year, and the bank is mulling how to proceed from here on out. A similar strategy to JPMorgan would not be out of the question entirely,
It is also worth remembering that the wealthy families of yore are not that active in the gold industry either. All of these changes have resulted in more opportunities for newcomers and service providers to take a stab at improving their market position accordingly. Who is looking to fill the void, or when they will make a move exactly, is a different matter altogether.
Gold Price Impact Remains Unclear
With the dominance by banks, financial institutions, and wealthy individuals decreasing rather rapidly all of a sudden, the impact on the gold price remains unclear. Despite some ongoing volatility, the bullion price hasn’t shown too many signs of turning bearish just yet. In fact, it seems to cling to the $1,700 support like never before, indicating that a move up remains likely.
A less centralized gold industry can genuinely drive global demand for the precious metal. Without having to go through centralized institutions and service providers, the market will become a lot more “open”. In theory, this can significantly boost demand for gold, Given how some governments are already embracing this metal – including regions such as Turkey, Vietnam, and Malaysia – the coming years will undoubtedly get very interesting.