China aims counterweight in gold trade with yuan fix


A decade after China kicked off a series of gold market reforms, plans to establish a yuan price fix mark one of Beijing’s biggest step so far to capitalise on the country’s position as the world’s top producer and a leading consumer.

While there is no immediate threat to the gold pricing dominance of London and New York, the benchmark could ultimately give Asia more power over bullion trade, particularly if the yuan becomes fully convertible, industry sources say.

The yuan fix is due to launch by end of 2015 via the Shanghai Gold Exchange (SGE), which last year allowed foreign players to trade gold using offshore yuan.

“Across the commodity markets as a whole, we’re seeing some very significant initiatives by the Chinese authorities,” said Nic Brown, head of commodities research at Natixis.

“For the gold market, it’s an attempt to provide a Chinese counterweight that offers liquidity, offers physical metals, offers futures trading for the markets in the Asian time zone,” he said.

Asia is the top buyer of gold, with China and India alone accounting for about half of global consumption, but London and New York are regarded as price benchmarks for spot and futures trading respectively.

In the last year, other attempts have been made to create a regional benchmark, including by Singapore, but China is being the most aggressive.

“The SGE and China wants to become the premier marketplace for gold trading and set the reference price as their view is this is where most of the gold is held and produced,” said a long-time bullion trader in Asia.

At a gold conference in Shanghai last week, SGE’s Vice President, Shen Gang, said efforts towards internationalisation of the China market and building the exchange into an influential one globally would continue.