China to Launch Yuan-denominated Gold Fix

Mineweb reported that China is set to launch a yuan-denominated gold fix on April 19. The move is expected to increase the Asian nation’s influence on the gold market.
As quoted in the market news:

Like the London Gold Fix, the Shanghai Gold Exchange’s (SGE) benchmark price will be set twice per business day and both local and foreign banks will be allowed to trade the contract. It is understood that clients of foreign banks will be allowed to trade anonymously whereas those of domestic banks will not enjoy the same privilege. In China, the initial price for the first auction will be determined by a ‘trimmed arithmetic average of price-setting members’ inputs’ whereas the London auctions kick off using a price selected by an independent chairperson, Donoghue said.
The state-run SGE deals solely in physical gold whereas ‘paper gold’ contracts are factored into the London Gold Fix, administered by the London Bullion Market Association (LBMA). “It’s increasingly unclear that the paper gold market and physical market are as linked as they should be. Someday, there’s going be a delivery issue. A mismatch between paper and physical plays would redirect the market more toward the physical and would facilitate rising positions in Chinese contracts,” Butler said by telephone.

John Butler, vice president and head of wealth services at GoldMoney, commented:

As the largest producer and consumer of gold, it is only logical that they develop the infrastructure to trade, price and provide liquidity for gold in their own currency.

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