Shanghai Gold Exchange International Board Another Blow To US Dollar
By GCRU Gold News on Tuesday, June 10 2014, 00:03 - Permalink
The Chinese gold market is an important force, a positive energy in the international gold market but its influence does not correspond to its mass and scale. Last year China’s domestic gold mines produced 428 tonnes; at the same time China imported 1540 tonnes of gold, adding up to nearly 2000 tonnes. China’s import volume is significant but China’s influence on the price of gold is very small. Real influence still lies in the West. Data such as Non-farm payroll, or even a speech could impact the gold market in a big way. In this sense, the mass and scale of China’s gold market and its influence in the international gold market does not match. Through the SGE international board Chinese pricing power will increase.
Foreign investors can directly use offshore yuan to trade gold on the SGE international board, which is promoting the internationalization of the renminbi. The international board will form a yuan-denominated gold price index system named “Shanghai Gold”. Shanghai Gold will change the current gold market “consumption in the East priced in the West” situation. When China will have a right to speak in the international gold market, pricing will get revealed. New York prices gold through bidding whereas the gold price is fixed by five banks in London. However the London gold fixing price is now being questioned since these five banks are price-fixers while at the same time they are also the market’s most important participants.
The development of China’s gold market is not limited to an increase in scale but a series of moves including market development, product improvement, system development and risk prevention. Marketing, pricing mechanisms and international standards are all very important building blocks so every aspect of China’s gold market should join forces to speed up development.
The Shanghai Gold Exchange has nearly 8,000 institutional investors and nearly 5 million individual investors.
The International board will be a platform with global investors. This will raise the standard of product assortment, ability to prevent risk, information technology and support, market promotion and regulation. China is fully qualified and may become the world gold market’s very important first class player.
Regional commercial banks should seize the trends and opportunities in the development of China’s gold market, and become actively involved in the market.