China trials yuan gold fix in bid to set price

May 6, 2015

Beijing (May 6)  China conducted trial runs for the planned launch of a yuan-denominated gold fix last month, three sources familiar with the matter said, in a sign the world's second-biggest bullion consumer was moving closer to creating a benchmark price.

The State-run Shanghai Gold Exchange (SGE), on whose international platform the fix will be launched, conducted the trial with major Chinese banks and a few foreign banks, the sources said this week.

The SGE could not be immediately reached for comment.

China, also the top gold producer, feels its market weight should entitle it to be a price-setter for bullion and it is asserting itself at a time when the established benchmark, the century-old London fix, is under scrutiny because of alleged price-manipulation.

The London Bullion Market Association said it was considering the possibility of creating an exchange for gold trading in the city, a shift away from the over-the-counter system.

"The launch of the fix is toward the end of the year ... Banks were invited in April to test the fixing process," said one of the sources directly involved in the process.

The SGE will act as the central counterparty, unlike the London fix where the bullion banks settle trades among themselves, the source said.

"No final proposal on the fix has been given yet. This was like beta testing and there is still some room for discussion," said a second source, a bullion trader who participated in the testing.

Participation for the fix will be open to members of SGE's international board, and more trial runs are expected to be conducted later, the sources said, speaking on condition of anonymity as the plans are still in initial stages.

The SGE, which has been at the forefront of China's pricing efforts, opened an international bourse in 2014, allowing foreigners to trade yuan-denominated gold contracts for the first time.

Source: GlobalTimes

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