China strives to conquer gold market... But first, it needs to go though New York, London

"Control over the gold price is exercised in New York and London, leaving China at the mercy of those two centers." Julian Phillips, GoldForecaster.com

It makes sense that China wants its part. After all, it is the world’s largest producer and one of the largest buyers of the metal, often running in line with India as the globe’s top consumer.

“Given that China is the epicenter of the physical gold market, it does make sense that the Chinese government would want its physical Shanghai gold market to supplant the Comex derivative market (and others) as the primary global price-setting mechanism,” said Anthem Blanchard, chief executive officer of online precious-metal retailer Anthem Vault.

Last month, the Bank of China became the first Chinese and the very first Asian institution to join the group of lenders that set the London Bullion Market Association’s gold price benchmark. Two more Chinese lenders are reportedly working to become members.

Commenting on the event, Julian Phillips, founder of and contributor to GoldForecaster.com, said that this will let Chinese banks take part in the global basis.

In March, the LBMA Gold Price replaced the historic London Gold Fix.

The places for setting gold price have traditionally been situated in New York and London. However, there is a distortion of supply and demand given so little gold going through Comex in physical terms, as it only shows the trading picture of speculators in New York, said Phillips

Just 5% of contracts are delivered on Comex after notice has been given of this intention, he noted.

With New York and London being the price-setting hubs, gold prices have been "well below the level of demand and supply should reflect,” Phillips said. While the Asian nation does not want an uncontrolled gold price, it also “does not want the U.S./U.K. to have control over this market if they are minor players.”

China's presence in the world's gold could also be positive for the renminbi.

Trading in gold can be promoted, "with Chinese banks taking up stock and selling it to other buyers in yuan,” Phillips said. Keep in mind a yuan gold “fix” price in Shanghai, expected before the end of the year and you will have a market “that is not distorted by the banks, their proprietary trading, or control of the gold distribution system globally.”

At the end of the day, China may start operating independently of the U.S. financially.

Gold isn’t just a commodity, it is a currency and is recognized by all global central banks as such, Phillips thinks.

Many expect that gold will act in a pivotal role alongside the U.S. dollar, pound sterling, yen and Swiss franc - and, this year, the yuan, he said.

In global trade, the greenback is predicted to lose a lot of its influence — “so it is not just about gold for China, it is a new monetary system relatively independent of the U.S. and the dollar.”