Gold Price Rebounds as China's Trading 'Goes Global' Again
Tuesday, 5/06/2025 15:31
The PRICE of GOLD jumped towards $3400 per Troy ounce as the Dollar sank again on Tuesday, also hitting 2-week highs just below last month's all-time records in most other major currencies, as Shanghai and London returned after a long holiday weekend to news that China will allow bullion held in international vaults to be settled against its gold trading contracts.
Two weeks ago, and amid those
record-high gold prices of $3500 worldwide, the People's Bank of China called on the Shanghai Gold Exchange to "expand [and] explore the internationalization" of its contracts as part of a new "Action Plan for facilitating cross-border financial services in Shanghai."
That will begin, Bloomberg reports today, with the SGE expanding its warehouse network to Hong Kong, where
"people familiar with the matter" say that a newly accepted vault in China's Special Administrative Region "will be operated by a subsidiary of Bank of China" − the country's 4th largest commercial bank and a member of international trade body the London Bullion Market Association since its founding in 1987.
Global gold prices rallied almost $100 per ounce on Monday as Shanghai and London both stayed shut for May Day, leaving the US Comex derivatives market to make the running.
Today's 2.15pm Shanghai auction − the benchmark price in gold's No.1 mining, importing, consumer and central bank-buying nation − then fixed above ¥792 per gram, rising 1.8% from last Wednesday's pre-holiday close.
That put China's onshore gold price more than $51 per ounce above comparable quotes in London, heart of the precious metal's international storage and trading network, with
the Shanghai gold premium offering dealers more than 6 times the typical incentive for new bullion imports.
Last month's
new "Action Plan" from Beijing − "developed to implement the guiding opinions of General Secretary Xi Jinping," according to the PBoC's announcement − seeks to expand the use of China's Yuan currency in international finance, building on its growing use in global trade amid
US President Trump's tariffs policy shock.
"The United States
weaponising tariffs has cast doubt over US asset safety, undercut trust in the Dollar, and shaken the greenback's global status," Reuters quotes E.Yongjian, vice general manager of Bank of Communications' research department, speaking at a seminar on Yuan internationalisation.
"That, in turn, has made Yuan assets more attractive, and will help broaden cross-border use of the Chinese currency."
The SGE in September 2014 launched an international exchange, enabling foreign and domestic holders of CNH − the so-called "offshore Yuan", which is more freely convertible to other currencies than the "onshore" CNY − to trade bullion held in Shanghai's free-trade zone.
Trading on the SGEI leapt at first, briefly overtaking volumes in the Exchange's main Au(T+D) contract for onshore metal in March 2015, amid heavy trading and investment more widely using the CNH.
But the international bourse's volumes then collapsed, even as trading volumes in the SGE's domestic contracts set new record highs and despite the Exchange
repeatedly extending fee discounts and waivers for handling and storage fees in the SGEI to try and encourage more foreign traders to join.
Two of the SGEI's 3 gold contracts have now seen zero or near-zero volumes since late 2016, while the iAu9999
achieved less than 2.0% of its onshore equivalent's turnover during January-to-March this year, according to data published by the Exchange.
All 7 of the international board's market-making members today
are Chinese banks.
Today's Shanghai fix came 4.5% below 22nd April's all-time high of ¥830 per gram.
London's 3pm benchmark auction then fixed 1.1% below that day's record US Dollar price of $3433 per Troy ounce.
The UK Pound price fixed 1.2% below its mid-April London benchmark peak of £2566, while the gold price in Euros fixed barely €5 per ounce beneath its record of €2993.
Gold's record highs and sharp pullbacks over the past month
"almost all occurred around the opening hours of the Chinese market" said analysis last week from US investment bank Goldman Sachs, identifying flows through the SGE and Shanghai Futures Exchange as becoming more important to gold's recent price moves than US Comex futures and options.
Email us
