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.


This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

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