China Seeks Gold Medal in Gold Trading

The world’s best performing nation in the Beijing summer Olympics seeks to continue its glory and become the largest trading

The world’s best performing nation in the Beijing summer Olympics seeks to continue its glory and become the largest trading centre for Gold. China’s Shanghai Gold Exchange has drafted rules for a new interbank market for the precious metal. The new ‘market’ will be the first for the precious metal which hit a new high in 2011 ($1,921.41) on the back of the euro-zone debt turmoil and a second global recession.

Chinese investors can trade online at the Shanghai Gold Exchange (SGE) and the Shanghai Futures Exchange (SHFE). China is gradually opening up its capital markets to foreign investors who are curently unable to trade in China.

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The SGE Gold contract is trading at RMB 328.80.

The Gold Exchange is taking all the glory as it embarks on a mission to become the largest executing venue for the precious metal. The exchange was established in 2002,  it was founded by the People’s Bank of China. The exchange performs the regulated functions stipulated by Management Rules of Gold Exchange.

The SGE has around 130 general member which are mainly jewellery and mining companies, in addition there are foreign and local banks; foreign banks who offer trade execution include; HSBC Bank (China) Limited, Standard Chartered Bank (China) Limited, ,The Bank of Nova Scotia, ANZ Bank (China) Limited, Credit-Suisse and Singapore’s United Overseas Bank (China).

The SFHE Gold contract is trading at CNY 327.06.

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China is the largest producer of Gold and with a middle class hitting 600 million Chinese people have been attracted to the precious metal for consumption purposes in the form of Jewellery and a new wave of investors are finding the fruits as an investment product with Gold being a safe haven when equity and bond markets underperforming. The managing director of the World Gold Council Marcus Grubb states “Chinese gold demand is on track to expand by seven percent to 870 tonnes this year. On its current path, China will likely surpass India as the single largest market for gold in 2012”.

Emboldened by China’s ambitions to play a more significant role in global commodity prices, one of China’s largest international banks ICBC is exploring membership of major exchanges such as COMEX and intends joining the 11 market makers of the London Bullion Market Association (LBMA). This will develop the bank’s position as on-and-off shore giant in commodity trading for Chinese institutional and retail investors.

Domestic demand and investors appetite for rapid moves has opened up the Gold market and this has had a positive effect on trade volumes. According to the U.S. Futures Industry Association, China was fourth in terms of volume of gold futures contracts traded in 2011.
Total trade for China’s gold futures hit 722.18 million lots in 2011, a 113 percent jump from a year ago, while turnover jumped nearly 180 percent to 2.55 trillion yuan ($401.9 billion), according to data from the Shanghai Futures Exchange.

Traders executing on the Shanghai Gold Exchange have a diverse range of contracts; the SGE offers a total of 12 spot and forward contracts for a range of precious metals, including Gold, Silver and Platinum.

If the trend continues China will continue to dominate the global capital markets as it has done in the Olympics and World Economy. The aim to make Shanghai a financial centre is well on course and developments in the commodities and currencies sectors are making China a ‘price maker’ not just a ‘price taker’

Forex Magnates team wrote a detailed report on the status of FX in the worlds most populous nation, available in the Q2 quarterly report 2012.

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