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China to launch yuan gold benchmark in April: sources

[SINGAPORE] China has delayed the launch of its yuan-denominated gold benchmark on the Shanghai Gold Exchange (SGE) to next year, two sources familiar with the matter said.

The yuan price fix would mark one of China's biggest steps so far towards capitalising on its position as the world's top producer and consumer of gold. State-run SGE had initially planned to launch the benchmark by the end of this year but it will now be launched in April.

The reason for the delay was not immediately clear. The exchange was without a chairman for nearly six months, before it named a central bank official as the head of the bourse in late October. "It will start in April with Chinese banks and some foreign banks," said a source with a local bank that imports gold. "Jewellers, miners and banks could use this price as a benchmark." The SGE was not immediately available for comment.

China thinks its market weight should entitle it to be a price-setter for bullion, and market reforms have been gathering pace over the last two years. China allowed foreign banks to trade other yuan-denominated gold contracts on the SGE for the first time last year and also granted them import licenses.

A yuan fix would not be seen as an immediate threat to the gold pricing dominance of London and New York, but it could ultimately give Asia more power, particularly if China's currency becomes fully convertible.

Once launched, the Chinese benchmark's success would depend on the participation of foreign banks, which may be reluctant to join given the scrutiny of global benchmarks following the manipulation of the London interbank offered rate (Libor).

Sources have earlier told Reuters that the yuan benchmark would be derived from a 1 kilogramme contract to be traded on the SGE for a few minutes each day, with the exchange acting as the central counterparty.