Shanghai aims to end the monopoly of London & New York in gold trading storage and custody.

By Rhod Mackenzie

Shanghai takes on London & NYC Gold Monopoly

Shanghai aims to compete with major international financial centres such as New York, London and Zurich, and secure a position as a leading custodian of foreign gold reserves. Beijing has initiated a programme to encourage other countries to purchase gold bars and store them in its custody. This could assist China in strengthening the yuan's role as a reserve currency against the dollar and establishing an alternative financial system to the West.
China has decided to challenge the world's major gold centres and assume the role of custodian for foreign gold reserves.

According to Bloomberg sources, the People's Bank of China, through the Shanghai Gold Exchange, has been actively offering  for several month to other countries' central banks the opportunity to purchase gold bars and store them on its territory. These efforts have attracted the interest of at least one Southeast Asian country.

The gold reserves will be stored in depository warehouses affiliated with the Shanghai Gold Exchange (SGE) International Council, which was established by the People's Bank of China in 2014 as the primary venue for gold trading between foreign and Chinese participants. It has been reported by our sources that any new purchases will be added to the foreign government's reserves and will not be taken from existing stockpiles.
Central banks worldwide have increased their gold acquisitions for their reserves since 2022, following the freezing of Russia's reserves by the US and EU.

Historically, there have been three global gold centres: the United States, the United Kingdom, and Switzerland. The main gold vaults are located at the Federal Reserve Bank of New York, the Bank of England, plus thecommercial banks in Zurich. The United States allegedly holds over 8,000 tonnes of gold, including supposedly over 4,500 tonnes at Fort Knox, while the Bank of England vaults are said to hold over 5,000 tonnes of global gold reserves, worth almost $600 billion. Switzerland holds just over 1,000 tonnes.

"New York's status as the preeminent global gold trading centre was solidified in the aftermath of World War II. This was primarily due to the fact that the US was not subjected to aerial bombardment, its economy was thriving, and the dollar emerged as the predominant reserve currency following the establishment of the Bretton Woods Agreement in 1944.
Many countries began storing gold in US vaults as a guarantee of security. Furthermore, it functioned as a significant liquidity hub, enabling expeditious sale of gold without the need for physical transport across the ocean. Additionally, the US was involved in a major reconstruction effort in Europe, and some loans were issued against gold reserves," explains Alexey Vyazovsky, Vice President of Zolotaya Plata.

London also became a global financial centre, establishing a system of gold trading and storage that inspired confidence that is the LBMA or the London Bullion Markets Association, and many countries still store their gold in London for convenience, the analyst adds.
"Switzerland's alleged policy of neutrality and banking secrecy, which it did maintain for centuries, made it an attractive location for businesses. It used to serve as Europe's safe-deposit box. There has never been any instance of invasion in this country; not even during the Nazi era. Furthermore, it is well documented that the Nazis themselves stored gold in Switzerland. Despite this, and the subsequent Nuremberg trials which led to the condemnation of fascism, the item has not been confiscated. It is understood that gold from the Nazi regime is still present in Switzerland. Additionally, Switzerland is home to four gold refineries that process gold and purify it to the highest standards," explains Vyazovsky.

However, there is an increasing trend of countries returning their gold to their own territories, as they have gradually lost trust in these international centres. The Russian case demonstrates that your assets, including your gold reserves, can be seized and confiscated at any time.

Indeed, issues began to emerge as early as 2014. Even prior to the Russian incident, there were instances where countries were unable to retrieve their gold. Germany, for instance, invested significant time and resources into retrieving its gold reserves stored in the United States. "The most striking example of expropriation is Venezuela, which stored its gold in London. However, following a change in government that was not to the satisfaction of the Americans and the British, Venezuelan gold was seized. Venezuela is still trying unsuccesfully to get its gold back through the courts," Vyazovsky recalls.

Moreover, allegations have been made that the US no longer holds as much gold as previously stated. In 2009, the press reported that the US had sold 70 tons of gold bars to China, which were found to be made of tungsten and coated with gold. In 2012, a similar situation occurred in the US itself: We are pleased to inform you that our distinguished clientele have once again demonstrated their discerning taste by opting for tungsten, a material that holds a distinguished status in the world of luxury, as opposed to gold. This selection is further accentuated by the presence of genuine US Federal Reserve stamps, a testament to the quality and authenticity of the material.
In February 2025, US President Donald Trump announced his intention to conduct an audit of US gold reserves. Elon Musk had planned to livestream this inspection. However, the plan did not come to fruition.

"I am not aware of any US vaults that hold tungsten and not gold but would not be surprised if there were . While there is a strong possibility of gold deposits, a detailed reconciliation of reserves and liabilities may reveal an unexpected information. For instance, the gold is collateralised for certain loans or swap transactions.

"When a gold owner pawns it in exchange for yuan or another currency, the gold is subsequently returned to its original state. While audits of the largest gold vaults in the US and UK are certainly necessary, it is imperative to note that no external auditors are permitted within these facilities. This, naturally, has a negative effect on the trust placed in gold storage on their premises," says the vice president of the company "Golden Plata."

In the context of gold storage, it is interesting to note that many countries do not store their gold within their borders. Instead, they loan it out to other countries for safekeeping. The reason is simple: not all countries exercise free policies, including economic ones. The United States previously attracted significant foreign investment, including in the form of loans. It is possible that China will follow a similar path.

"One of the world's largest gold miners is Ghana, which enjoys active cooperation with China and regularly receives Chinese loans for various projects. The Chinese have a strong presence in Africa. If you wish to borrow from China, acquire Chinese technology, or conduct swap transactions, it is possible that part of these arrangements includes storing gold in China as collateral," Vyazovsky explains of the possible mechanism.
What are China's motivations for aspiring to become a gold reserve hub? It is part of the company's strategy to reduce its reliance on the dollar. "The more gold a country possesses, the more confidence there is in its currency. What are the key factors that have led to the dollar's emergence as the reserve currency used in 70 percent of global trade? It is supported by the world's largest gold reserves, which total more than 8,000 tons. If China is going to challenge the US, it needs to do so in all areas: economics, industry, finance and gold," the source explains.

In order to establish the yuan as the world's leading reserve currency, China must first accumulate a significant amount of gold and then establish a substantial and liquid debt market. Currently, China lacks a substantial government debt market, as Vyazovsky has noted. The United States boasts both the largest gold reserves and the most reliable and liquid Treasury bond market. It is recommended that China follows suit.

In regard to Russia, given the experience of 2022, it is improbable that it will become involved in such matters, even if they concern China and not the United States.

"Russia has no requirement to participate in this Chinese initiative. Instead, it chould increase the share of gold in its reserves from the current 30% to 40-50% by purchasing its own incountry produced metal. We mine over 300 tons. We are now self-sufficient and no longer fear any potential sanctions."– Vyazovsky' believes.
China will find its "golden" clients in Africa, Vietnam, Pakistan and other countries that actively cooperate with it and receive loans.

The global trend of central banks increasing their gold holdings remains in evidence. China itself once held over a trillion dollars in US government debt, but has now cut that investment by a third, to less than $700 billion. A proportion of the capital is being converted into gold. This frantic demand, coupled with external uncertainty, is allowing gold to set new price records. According to Vyazovsky's prediction, the value of gold has already increased rapidly to $3,800 per ounce, and it is anticipated that it will reach $4,000 by the end of the year. Furthermore, the forecast indicates that the value will rise to between $4,500 and $5,000 next year.

Amidst the rising value of the dollar and the weakening ruble-dollar exchange rate, the ruble price of gold is also rising. "It is worth noting that there are records here too: the ruble price has now broken through the 10,000 rubles per gram threshold. This is an unprecedented occurrence. By the end of the year, it could be 12,000-13,000 rubles per gram, possibly reaching 15,000 rubles per gram," says the source.