China plans to launch yuan gold fix by end of 2015

Highlights:

  • Asian power giant China plans to launch a yuan-denominated gold fix by the end of 2015 via the Shanghai Gold Exchange (SGE).
  • Its main  aim is to give the world’s biggest bullion producer and consumer more influence over pricing.
  • The first public confirmation made by an exchange official comes after Reuters cited sources in February on the proposal for the fix to be set through trading on the SGE, the world’s biggest physical bullion exchange.
  • China feels it is entitled to be a price-setter for bullion and is asserting itself at a time when the global benchmark, the century-old London fix, is under scrutiny for alleged price-manipulation.
  • If the yuan fix takes off, China could compel local buyers and foreign suppliers to pay the domestic yuan price, making the London fix less relevant in the world’s biggest bullion market.
  • However, given the yuan is not fully convertible, the two benchmarks could exist side-by-side globally.
  • China has been making efforts to liberalise the yuan and increase its influence in global gold markets.
  • The Bank of China recently joined the London gold price benchmarking process, the first Chinese bank to do so, while the Industrial and Commercial Bank of China Ltd said it too was keen to join the process.
  • These banks could also join China's yuan gold fix.
  • The SGE has submitted details of the fixing process, and rules and regulations for participants, to the PBOC a few weeks ago, sources familiar with the matter said.
  • The yuan fix is the most recent effort by SGE to boost China's position in the global gold market.
  • The exchange opened an international bourse in September 2014, allowing foreigners to trade yuan-denominated contracts for the first time.
  • Australia and New Zealand Banking Group , Standard Chartered and HSBC are among the members of the bourse.