China's Gold Market Reforms: Less Drama Than Expected

China's gold market has been in the spotlight following claims that reforms would 'transform global gold trading' or trigger an immediate gold price explosion. However, according to Jeffrey Christian of CPM Group, the changes are much narrower than expected.

The Chinese government is allowing the last remaining retail leveraged gold positions to expire after a five-year phaseout designed to reduce fraud and excessive risk. This does not represent a shutdown of China's gold market, nor does it prove that physical gold is disappearing or that a paper gold market collapse is approaching.

Gold is currently trading near $4,068 and is caught between two important technical trendlines. Support is near $3,800. A break above the declining trendline could produce a short-term spike. Roughly 19.3 million ounces of August COMEX gold futures open interest remained outstanding, and much of it may be bought back or rolled into October and December contracts.

Silver also recently tested $55 and may rise with gold in the short term. Platinum and palladium price outlooks are also discussed, as well as rising political risks and higher oil prices.