China launches yuan gold benchmark to gain greater control over gold market
19 Apr 2016
China, the world's top gold consumer, today launched a yuan-denominated gold benchmark, in an effort to gain more control over the pricing of the metal and boost its influence in the global bullion market.
The Chinese benchmark price has been set at 256.92 yuan ($39.69) per gram on Tuesday, based on a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE).
''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 include 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 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.''
The gold bullion market has long been dominated by London and New York, where the global spot benchmark prices are currently set and China, the biggest market for gold, is seeking a bigger say in the global bullion market.
China, as the world's top producer, importer and consumer of gold, has also been trying to reform its domestic gold market in a bid to have a bigger say in the bullion market.
The yuan benchmark may not be immediately accepted in the international market, where bullion price like that of oil is still linked to dollar.
But, China believes that a yuan price may be accepted for international transactions over the years as the country continues with its benchmarking.
