Shanghai Gold Exchange launches intl board

Nation to gain greater recognition, influence worldwide

The Shanghai Gold Exchange (SGE) launched an international gold trade board on Thursday in the city's free trade zone, marking the beginning of gold trading in the Chinese market with both onshore and offshore yuan funds.

The benchmark price of iAu99.5 was set at 245.28 yuan ($39.93) per gram before the trading began and its price fluctuation limit was set at 6 percent, according to the SGE.

Domestic and foreign member investors of the SGE including Industrial and Commercial Bank of China, HSBC and Standard Chartered Bank could now trade all of the 11 yuan-denominated gold contracts on the bourse, a staff member from the SGE told the Global Times on Thursday on condition of anonymity.

Three new physically deliverable contracts were introduced on the board, including gold bars weighing 100 grams, 10 grams and 12.5 kilograms, respectively, the staff said.

After the first night's trading session, the price change for the three newly introduced contracts was set at 30 percent above and below the closing price on the previous day, and the maximum trading volume for each transaction was limited to 200 bars.

By launching its own international trade board, China, one of the world's largest gold buyers, is seeking to win more global recognition of its gold market and thus exert more influence over the gold pricing, Sun Yonggang, a gold analyst from Everbright Futures Co, told the Global Times on Thursday.

"As the policy restrictions are now removed, China is likely to see a dramatic surge in both gold investors and capital flows, which would certainly increase trade bargaining and thus naturally lend China more influence over pricing," Sun noted.

As transactions on the international gold board are all required to be settled in yuan, a further reform of the convertibility of the currency also plays a major role in boosting China's ability to gain pricing power in the global bullion market, Sun said.

Gold demand around the globe in the second quarter of 2014 was 964 tons, lower than the same period in 2013.

In 2013, China became the world's largest gold market, accounting for around one-third of global gold demand. By the end of 2017, the demand for gold is expected to grow by at least a further 20 percent, according to the latest estimates by the World Gold Council.