China's yuan gold benchmark to launch with 18 members

[SINGAPORE] Top Chinese banks and gold miners, along with the world's biggest jewellery retailer, will be among 18 members taking part in Beijing's new yuan-denominated gold benchmark, a source familiar with the matter said.

Two foreign banks will also join the benchmark-setting process, when it launches on April 19, marking China's biggest step to become a price-setter for gold.

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.

A yuan gold fix is not expected to pose an immediate threat to the gold pricing dominance of London and New York, but it could ultimately give Asia more power, particularly if the Chinese currency becomes fully convertible.

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China , China Construction Bank and Bank of Communications are among the ten Chinese banks that will participate, said the source, who declined to be identified because he was not authorised to speak to the media.

Two foreign banks would also join, the source said, without naming them.

Chow Tai Fook, the world's biggest jewellery retailer, Swiss trading house MKS, Chinese miners China National Gold Group and Shandong Gold Group will also be members, the source said.

MKS confirmed it was taking part, while Chow Tai Fook declined to comment.

The other companies were not immediately available for comment.

The Chinese benchmark price will be derived from a 1 kg-contract to be traded on the state-run Shanghai Gold Exchange (SGE), which will act as the central counterparty.

The price, to be quoted in yuan per gram, will be set twice a day based on a few minutes of trading in each session.

SGE was not immediately available for comment.

The spot benchmark in London is set via a twice-daily auction on an electronic platform with 12 participants after starting off with six.

The London fix, which was previously set via a teleconference among banks, was replaced by electronic auctions after a shake-up in benchmark setting following a scandal over rigging of the Libor interest rate broke in 2012.

Support from foreign banks will be crucial for the international use of the yuan benchmark, but China has struggled to get them to sign up due to sensitivity around benchmarks amid scrutiny by regulators.

Reuters reported in January that China had warned foreign banks it could curb their operations in the domestic market if they refuse to participate in the benchmark-setting process.


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