Gold exchange fixes sights on greater role
Print Edition
CHINA yesterday set its first-ever yuan-denominated gold benchmark price for 99.99 percent gold at 256.92 yuan (US$39.71) per gram.
The price was slightly lower than the Shanghai Gold Exchange’s 257.97 yuan benchmark, after 12 fixing members and six reference price members submitted their buy and sell orders during the 15-minute session.
With the launch of a Shanghai Gold Benchmark Price, the city is hoping to join London and New York as a global hub for bullion trading, said SGE Chairman Jiao Jinpu.
China is the world’s largest consumer and producer of gold, and has long sought a larger say in the deciding the global price of the precious metal.
The fix price will be set twice a day based on two trading sessions of 15 minutes apiece.
The 18 trading members involved in the process include the world’s largest lender Industrial and Commercial Bank of China, foreign lenders Standard Chartered and Australia & New Zealand Banking Group, the world’s top jewelry retailer Chow Tai Fook and China’s top gold miner Shandong Gold Mining Co.
While the Shanghai fix is unlikely to have an overnight impact on the global trading price of gold — the London fix has been around for almost a century — the launch of the exchange at least gives China a greater role in price-setting, and the significance of that will grow if the yuan ever becomes fully convertible.
“It is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai, and signals the continuing shift in demand from west to east,” Aram Shishmanian, chief executive of the World Gold Council, said at the launch ceremony yesterday.
“As the market expands to reflect the growing interest in gold by Chinese consumers, so will China’s influence increase on the global market,” he said.
As the world’s biggest physical bullion exchange, SGE traded 17,033 tons of gold bullion and derivatives last year, a rise of 84 percent from 2014, according to figures from the China Gold Association.
The People’s Bank of China’s gold holdings rose 1.5 percent in the first two months of the year to 1,788 tons, or 2.2 percent of the central bank’s foreign exchange reserves, the association said.
CGA Chairman Song Xin said the growing interest in the consumption of gold is in line with China’s process of financial reform and opening up, while the launch of a Shanghai fix meets the long-term strategy of expanding the yuan’s role as a global currency.
Pan Gongsheng, deputy governor of the People’s Bank of China, agreed.
“The market capacity and potential are huge,” he said.
“The launch of a Shanghai Gold Benchmark Price will provide a fair, transparent and tradable bullion price to global investors and help enhance the impact of the yuan on gold pricing.”
As well as the bullion market, the Shanghai Gold Exchange plans to introduce an international platinum fix within three years, one of its senior managers, who declined to be named, told Shanghai Daily.
“Things have changed and it’s no longer a one-way bridge,” said Jeremy East, global head of metals trading at Standard Chartered, referring to the long history of dollar-dominated gold prices.
“China needs to have its benchmark to open the door to more products and possible collaborations with the rest of the world,” he said.
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