AXMIN Inc (TSXV: AXM)
AXMIN Inc. (TSXV:AXM) is a Canadian-based exploration and development company with a strong focus on central and West Africa.
For a long time, the pricing power of gold in the world has been mainly dominated by the markets in the United States and Europe. However, an increasing number of people are starting to believe that the Western world is losing the pricing power of gold, and China is emerging as a marginal buyer of gold. What’s more concerning is the possibility of BRICS (Brazil, Russia, India, China, South Africa) collectively introducing a gold-based common currency, which could overturn the logic of gold pricing.
In recent times, the price of gold has shown remarkable resilience in the face of various adverse factors and has frequently been hitting historical highs. As we enter the second quarter of 2024, the price of gold continues to rise, with the gold futures price surpassing $2,264 per ounce, setting a new historical high.
Gold possesses the triple attributes of a commodity, a currency, and a financial asset. Over the past 50 years, it has experienced three waves of impressive bull markets, driven by factors such as inflation, hedging, and economic recession. However, the common thread been that gold’s role as a hedge against currency credit has remained unchanged.
Recently, prominent figures in the mining industry, including Frank Giustra, CEO of the Fiore Group, and Pierre Lassonde, Chairman Emeritus at Franco-Nevada Corp, have bluntly stated that the West has lost the pricing power of gold. Lassonde pointed out that the marginal buyer of gold is no longer the United States or Europe, but China. He emphasized that the central bank of China and the public together consume over two-thirds of the annual gold production, making them the new marginal buyer and, therefore, the determiner of gold prices.
Giustra also highlighted the possibility of BRICS introducing a gold-backed common currency, which could create more credit and reserves. He cautioned that if BRICS takes united action against the US dollar, it could cause significant market upheaval and potentially trigger a strong reaction from the United States.
Traditionally, the international gold price is primarily derived from the gold contracts of two major exchanges: the gold futures on COMEX (the New York Mercantile Exchange) and the spot gold prices on the LBMA (London Bullion Market Association). These two markets exert significant influence on the price of gold, and to some extent, the daily gold prices followed by the global market are generated by these markets.
However, in June 2016, the LBMA announced that the Intercontinental Exchange (ICE) had approved the participation of the Bank of China in the LBMA gold pricing, making it the first Chinese financial institution to participate in gold pricing. Furthermore, in the same year, the Shanghai Gold Exchange introduced the “Shanghai Gold” centralized pricing mechanism, leading to the gradual formation of a tripartite global gold pricing structure with London, New York, and Shanghai as the three international gold pricing centers.
Simultaneously, the People’s Bank of China has been steadily increasing its gold reserves. As of the end of February 2024, China’s gold reserves stood at 72.58 million ounces, representing an increase of 390,000 ounces compared to the previous month and marking the 16th consecutive month of gold reserve accumulation, with a cumulative increase of 9.94 million ounces (approximately 282 tons) during this period.
