Major banks are doubling gold purchases to 1,000 tons a year while 74% plan to reduce US Treasury holdings over the next five years.
China’s ICBC and China Construction Bank banned paper gold trading, threatening to expose fractional-reserve-style futures market price manipulation.
CME gold call options for December 2026 show 30,000 contracts at $20,000/oz, indicating that some traders expect a 400% price increase within six months.
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The current state of the world economy since the 1944 Bretton Woods agreement operates on certain assumptions regarding gold, oil, interest rates, the perceived strength of the US dollar, and the state of the country. In retrospect, it seems that the authors of that agreement never considered the rise of China, digital technology, tens of billions of dollars in US debt, and a long list of other developments since then. For the first time, gold has surpassed the US Treasury in value, and more recently the euro, to become the world’s leading reserve asset, now second only to the US dollar itself.
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Although the US dollar remains the world’s leading reserve currency, there are already cracks in the front. BRICS members now trade hundreds of billions in their own currencies. The US national debt, which is approaching $40 trillion after years of deficit spending by Congress, contributed to the decline in America’s credit rating, albeit a small one. In response, gold is increasingly being treated not just as a hedge against inflation but as a primary store of value, and central banks around the world are accumulating gold reserves, while reducing their holdings of US Treasuries in the process.
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The World Gold Council’s Survey of Central Bank Gold Reserves 2026 reported that central banks have accumulated an average of 1,000 tonnes of gold over the past four years, up from an average of 500 tonnes over the previous decade. In its latest survey of central banks, the WGC found that 89% of respondents expect global central bank reserves to continue to rise, while a record 45% said they expect their gold holdings to increase over the next 12 months. At the same time, 74% expect a lower holding of the US dollar among global reserves over the next five years. The corresponding increase in gold assets and the decrease in dollar exposure is unlikely to be coincidental.
Considering this trend, gold ETFs that actually hold gold bullion are likely to benefit from this ongoing buying by the institutional high class. Three things to consider: SPDR Gold Shares (NYSE: GLD), iShares Gold Trust ((NYSE: IAU)again SPDR Gold MiniShares (NYSE: GLDM).
Rock Beats Paper: Why Futures Manipulation is a Dying Trend
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Evidence of gold price manipulation in the futures market likely suppresses the real price of gold for decades, if not longer. China’s closure of its gold futures trading is expected to break the Ponzi scheme of multiple daily trades in the same gold allocation to reveal the true value of gold in existence – and allow the true demand for mrket price supply to emerge.
For almost 100 years in the US, COMEX has been the main place for trading metal futures, as the London market developed even earlier. These markets are overseen by regulators such as the CFTC, but in several documented and tried cases, traders at large institutions have been punished for manipulating precious metal prices. JPMorgan, for example, paid a total of $920 million in 2020 over spoofing. This partly reflects the way Western futures markets treat metals: as a hedge against price volatility and as a platform for price speculation. Although physical delivery is possible on these platforms, only a small part of the future of metal resides in physical metal; most are folded, closed, or paid off before expiration.
The South China Morning Post recently reported that the name comes from China’s biggest banks. China Construction Bank is closing its gold and silver customer trading facilities at the Shanghai Gold Exchange after July 24, and ICBC made a similar announcement on the same day, saying it will “close personal agency sales through mobile banking and Internet banking,” after which “closing, selling and delivery services for customers holding positions will be prohibited.”
China, one of the world’s largest buyers and holders of virtual gold, seems to see the writing on the wall. Many of its major banks – ICBC, Ping An, China Guangfa, Post Savings, and others – are scaling back their gold trading activities. This comes nearly eight months after a pullback in the silver market led to a blunder at the LBMA in the UK, which was unprepared for the surge in material demand from Indian buyers around Diwali. By some accounts, the Shanghai Futures Exchange stepped in to relieve the crisis, wiping out a large portion of its reserves in the process. The episode highlighted how the volume of paper trading in precious metals can reduce the physical supply available for delivery. It is flexible compared to fractional-reserve banking. Physical gold was also trading higher in Chinese markets, another sign of distrust in futures quotes.
As one of the world’s largest sovereign gold reserves, China’s latest move adds emphasis to the central bank’s hoarding trend. By curbing used paper gold, which critics say has helped suppress prices, China may be betting that forcing more physical deliveries will reveal how little futures markets are backed by the real metal. It’s a system critics liken to trading the same gold over and over, creating the illusion of a larger supply than actually exists.
Gold ETFs and Massive Bullish Sentiment Already Appearing
With gold at $4,000/oz, CME open interest exploded with December call options at strike prices of $10,000, $15,000 and $20,000 – indicating a strong bullish sentiment.
Although gold is still hovering around $4,000/oz. At the time of this writing, the latest reversal – attributed by many observers to strong US economic data and expectations that the Federal Reserve under Chairman Kevin Warsh may hold interest rates higher for a long time, as well as soft oil prices – has received more skepticism from some market watchers, who say it gives central banks a window to close short positions. Regardless of the cause, buy-and-hold ETFs can take advantage of low prices. Notably, there is also some unusual placement in the futures market. CME lists December 2026 gold call options at strikes well above current prices, with reasonable open interest for each:
$10,000 call: 11,757 open interest
$15,000 call: 27,348 open interest
$20,000 call: 30,021 open interest
It is important not to read too much into this. Deep out-of-the-money calls are inexpensive and are often purchased as low-cost “lottery tickets” or risk hedges rather than reliable forecasts, and open interest reflects the number of contracts remaining, not a consensus forecast. What it shows is that at least some traders are making – or defending – very big moves. In context, gold’s volatility has historically started in the mid-teens, so a triple or quadruple within six months would be more unusual than the base case. With that secret in mind, these ETFs have a look:
SPDR Gold Shares (NYSE: GLD) – Founded by State Street Global Advisors in 2004, GLD is an ETF that trades on the NYSE in the US. GLD also trades on exchanges in Mexico, Singapore, Hong Kong and Japan. It maintains a trust that buys, stores, and sells gold bullion in bars or in smaller configurations divided into baskets. GLD is intended to give investors access to the benefits of owning a billion gold coins on a limited basis. HSBC is the custodian of GLD and the capital is held in London.
iShares Gold Trust ((NYSE: IAU)– IAU is BlackRock’s version of a physical gold reserve in an ETF configuration. JP Morgan Chase is its gold custodian, with vault storage in New York and London.
SPDR Gold MiniShares (NYSE: GLDM) – Also a product of State Street Global Advisors, GLDM was created with a low fee of 0.10% as a cost-neutral option for investors who want exposure to gold but are hesitant due to GLD’s average expense ratio of 0.4%. Since its inception in 2018, GLDM has traded on the NYSE. Structurally, its structure and operation are similar to GLD, albeit on a reduced scale. Its custodian is ICBC, and the warehouse is in London.
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