Gold News

China's Gold Market Targets 'Speedy Growth', Cross-Listing with Comex, LBMA Forum Told

GOLD MARKET prices in wholesale London trade slipped near yesterday's 2-week lows on Thursday, edging down after a quiet session in China despite fresh wrangling in Europe over Greece's worsening debt crisis.
 
Administered for the London Bullion Market Association, Thursday morning's Gold Price benchmark was found at $1174.60 per ounce – the lowest AM price since 8 June – on moderate buying and selling demand.
 
Turnover in the Shanghai Gold Exchange's kilobar contract, in contrast, held above 21 tonnes for the 3rd day running as prices eased towards a $1 premium over London quotes.
 
Dollar gold prices then slipped to $1172 per ounce as Asian stock markets closed sharply lower, but Eurozone equities held flat amid a flurry of deadlines set by Athens' creditors ahead of Greece's €1.6 billion repayment to the IMF, due next Tuesday. 
 
"We will be introducing a Yuan-denominated fix at the right moment, we hope by the end of the year," said Shen Gang, vice president of the SGE, at the LBMA Bullion Market Forum in Shanghai today.
 
The SGE is also in talks with US derivatives exchange the CME about cross-listing each other's contracts, Shen was quoted by Bloomberg.
 
In contrast, London's wholesale gold market – center of the world's physical trade for more than 200 years – shows no appetite for moving onto exchange-traded contracts, Reuters quotes LBMA chief executive Ruth Crowell, speaking Wednesday ahead of the trade association's now annual forum, held jointly this year with the SGE at the Mandarin Oriental Hotel in Pudong, Shanghai.
 
"Our next step," says Crowell following a market review by consultants Ernst & Young, will " certainly [be] trade reporting" of volumes in London's wholesale market, currently aggregated only through the monthly clearing statistics shared by London's biggest market-making member banks.
 
But "the big message" given by market participants to the EY review is that arranging a central counterparty clearing house (CCP) – a necessary step for any exchange-traded market – "just adds to the cost of the existing model," Crowell added.
 
"At the moment, there is no demand for a central counterparty."
 
Less than a week after state-owned Bank of China became the first Chinese institution to join the LBMA Gold Price benchmark as a direct participant, meantime, "ICBC is very keen on participating," said Zhou Ming, general manager for precious metals at the world's largest bank, at the LBMA/SGE forum in Shanghai today.
 
With the gold market hub of Shanghai now receiving bullion imports directly, new data from Beijing today showed a sharp rise in net imports of gold bullion to mainland China in May, up 35% from April to almost 71 tonnes.
 
The first year-on-year rise since November, last month's growth still leaves net imports from Hong Kong so far in 2015 some 17% behind the first 5 months of 2014.
 
Also speaking at the LBMA/SGE forum, the People's Bank of China will continue to support "speedy and healthy growth" in China's gold market, as well as "internationalization", said central bank deputy governor Pan Gongsheng.

Adrian Ash is director of research at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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