Shanghai: The Shanghai Gold Exchange (SGE), the world’s largest physical gold exchange, launched a yuan-denominated benchmark price on Tuesday in Shanghai, a measure that will benefit both China’s domestic gold market and the global precious metals market.
SGE said in a circular that the launch of the Shanghai Gold Benchmark Price will be useful as it adequately reflects the gold supply and demand in China, and represents the price trend of China’s gold market.
Shanghai Gold is gold ingots with the standard weight of one kilogram and a fineness of no lower than 999.9, delivered in Shanghai, and traded via SGE price trading platform. It is quoted in yuan per gram, and settled via the SGE platform.
“At present, China’s gold derivatives market is lacking in an authoritative and equitable gold benchmark price which is denominated in renminbi. The launch of Shanghai Gold Benchmark Price will facilitate the development of China’s gold derivatives market which will also have a big impact on the price of gold related financial products, wealth management products and derivatives,” the circular said.
Shanghai Gold Benchmark Price follows the principle which allows all orders executed on the SGE price trading platform. The benchmark price is determined when price and volume reach the balance during the auction period on the SGE price trading system.
Experts said the Shanghai Gold Benchmark Price will play a significant role in the global gold market. According to David Marsh, Managing Director and Co-Founder of Official Monetary and Financial Institutions Forum, the yuan-denominated gold benchmark offered by SGE is a necessary addition to the international gold market and should make the pricing of physical gold more open to the play of market forces.
Mr. Aram Shishmanian, CEO, World Gold Council said, “The launch of the Shanghai Gold Benchmark represents another milestone both in the impressive development of the exchange and in the internationalization of China’s gold industry. It is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East. The World Gold Council continues to support the development of China’s gold market, and as the market expands to reflect the growing interest in gold by Chinese consumers, so too will China’s influence increase on the global gold market .”
Mr. Roland Wang, Managing Director, China, World Gold Council said, “China needs a gold benchmark that reflects local market flows and reduces gold’s price dependency on the US dollar – so this is the ideal time for the Shanghai Gold Benchmark to launch. An Asian-focused, yuan-denominated benchmark will significantly increase the liquidity and efficiency of the gold price discovery mechanism. The World Gold Council is honoured to witness this historic moment and the anticipated benefits it will bring to China and the global gold market.”