Chinese flag draped across stacks of gold bars

China’s Yuan-Based Gold Fix to Include Two International Banks

Two international banks will join the proposed Chinese yuan gold fix, which is expected to be launched in less than a week, according to media reports.

Wednesday, Reuters reported that ANZ and Standard Bank will be the only two international banks that will be involved in the daily gold auction, with a total of 18 banks participating. Both banks have gold import licenses into China.

The article also noted that the new benchmark is expected to be launched April 19, which two months ago was only a rumor.

Quoting the Shanghai Gold Exchange (SGE), Reuters said that four state-owned banks are Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China, Bank of China and China Construction Bank. Other regional banks to be involved in the process are Bank of Communications, Shanghai Pudong Development Bank, China Minsheng Banking Corp, Industrial Bank Co, Ping An Bank and Shanghai Bank.

The SGE also said that Bank of China (based in Hong Kong) retailers Chow Tai Fook and Lao Feng Xiang, Swiss trading house MKS, Chinese miners China National Gold Group and Shandong Gold Group will also be members.

According to the rules that were sent to participating banks in February, the benchmark, which will be quoted in yuan per gram, will be set twice a daily. The auction will be derived from a one-kilogram contract, traded among the 18 members of the SGE.

Many analysts are not surprised that China is moving forward with its plan to launch its own yuan-based gold benchmark as it has become a central player in the marketplace. China’s benchmark will now fight for dominance with the London Bullion Market Association Gold Price Fix, which was launched last year and replaced the century-old London Fix.

In an interview with Kitco News in February, Bernard Dahdah, precious metals analyst at Natixis, said that China is the world’s largest gold-consuming nation, the world’s biggest gold-producing nation and has ambitions to be the world’s major gold hub.

Although the yuan-gold fix is progressing, many analysts note that it could still be many years before it takes over the more established international markets like London and New York. While two international banks are now involved in the auction, it could still be seen as a domestic benchmark.

According to reports, China has struggled to get international institutions on board as many are still concerned by the lack of transparency in the Chinese marketplace.

This story originally appeared on Kitco on April 13, 2016. View article here.


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