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China launches yuan gold fix to boost power in global bullion market
[BEIJING] The world's top gold consumer China launched a yuan-denominated gold benchmark on Tuesday, as the country took an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.
The benchmark is a culmination of efforts by China over the last few years to reform its domestic gold market in a bid to have a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is currently set.
As the world's top producer, importer and consumer of gold, China has baulked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.
The new benchmark may not be an immediate threat to London, but industry players say over time China could set the price of the metal, especially if the yuan become fully convertible.
The Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan (S$53.50) per gram on Tuesday.
"The Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price ... will help improve yuan pricing mechanism and promote internationalisation of the Chinese gold market," Pan Gongsheng, deputy governor of the People's Bank of China said at the launch in Shanghai.
The benchmark price will be set twice a day based on a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform with 12 participants.
The 18 trading members in the yuan price-setting process includes China's big four state-owned banks, foreign banks Standard Chartered and ANZ, the world's top jewellery retailer Chow Tai Fook and two of China's top gold miners.
The yuan price will be complementary to the prices in London and futures trading hub New York, the World Gold Council (WGC) said. "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," WGC's CEO Aram Shishmanian said in a statement.
"As the market expands to reflect the growing interest in gold by Chinese consumers, so too will China's influence increase on the global gold market."