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Gold ETF Plans For Shanghai Gold Exchange

THE SHANGHAI Gold Exchange (SGEx) has announced plans to launch China's first domestic Gold ETF. 

Wang Zhe, SGEx's general manager, told a gathering of China's top economists and finance officials on Saturday that while "there are some complexities", SGEx is working with regulators to iron them out.

"Currently, supervision of gold trading falls on the central bank, while the China Securities Regulatory Commission is responsible for monitoring ETFs. This causes a problem over who is responsible," said Wang. 

Nevertheless, SGEx is "looking for a win-win solution" which will allow it to launch its Gold ETF, for which it has not set a timetable.

The announcement follows last week's opening of the Hong Kong Mercantile Exchange, which offers trading in Gold Futures contracts. The Shanghai Futures Exchange said on Saturday that it plans to offer Silver Futures by the end of the year.

Investors in China got their first access to foreign Gold ETFs last year, when Lion Fund Management began raising capital under China's Qualified Domestic Institutional Investor (QDII) scheme. The Lion Fund has a license to invest in Gold ETFs overseas, such as the US-based SPDR Gold Trust (ticker symbol: GLD), the world's largest Gold ETF.

Holdings in the SPDR Gold Trust peaked at 1320 tonnes at the end of June last year. Since then net investment outflows have seen holdings fall by 119 tonnes.

China deregulated its gold market in 2001, abolishing the central bank's monopoly on Gold Bullion. SGEx began the following year.

Since 2001, China's annual Gold Bullion consumption has grown 182%, from 206 tonnes to 580 tonnes, according to figures from the World Gold Council.

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