SINGAPORE Feb 27 China plans to launch a
yuan-denominated gold fix this year to be set through trading on
an exchange, sources familiar with the matter said, as the
world's second-biggest bullion consumer seeks to gain more say
over the pricing of the precious metal.
The Chinese benchmark would be derived from a new 1 kg
contract to be launched on the state-run Shanghai Gold Exchange,
a senior source directly involved in the process told Reuters.
China, also the top producer of gold, 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
If the Chinese fix takes off, it could add to the pressure
on the London benchmark, which is used worldwide by producers,
refiners and central banks to price holdings and contracts,
although the two could exist side-by-side.
"We need a renminbi benchmark for Chinese producers and
foreign suppliers to the market," said the source, using an
alternative name for the yuan. "This renminbi gold benchmark can
be complementary to the U.S. dollar gold-fixing in London."
The contract for the Chinese fix would be traded for a few
minutes each day to make the process transparent - addressing
one of the big complaints about the London fix - and the
exchange would settle all trades, the source said.
One barrier to wider international acceptance is that the
yuan is not fully convertible.
A second source with a global bullion bank said trading and
settlement could be done in offshore yuan to allow foreign banks
and other suppliers to participate, although only domestic
players are expected to participate initially.
China has already made some efforts to liberalise the yuan
and encourage foreign participation in its domestic markets,
especially in bullion.
The Shanghai Gold Exchange, which has been at the forefront
of China's pricing efforts, opened an international bourse in
September 2014 in the city's pilot free-trade zone, allowing
foreigners to trade yuan-denominated contracts for the first
It has also opened up silver contracts for foreign players
and launched gold options on a trial basis.
China's efforts to gain bigger sway on pricing gained
momentum last year, when regulatory scrutiny over the London
gold fix increased amid allegations of manipulation of the
benchmark, which is set through a teleconference between a
handful of banks.
A push to make the London process more transparent and
electronic has resulted in a new administrator and a revised
format, which is set to go live next month.
A new Chinese fix may be one too many for foreign banks.
"There are lots of compliance issues to deal with these days
and I don't think any bank would be very enthusiastic about
getting into another fix," the source with the bullion bank
Just this week, Switzerland's competition commission said it
was looking into possible gold price manipulation, while the
Wall Street Journal reported the U.S. Department of Justice and
the Commodity Futures Trading Commission were investigating at
least 10 major banks for possible rigging of precious metals
However, the fact that the Chinese price-setting would be
done through an exchange could comfort some as it would be more
transparent, the first source said. "There won't be any chance
of malpractice on this platform," he said.
Others in Asia have also launched exchange-traded contracts
recently with the aim of coming up with a price benchmark.
CME Group Inc launched a physically deliverable gold
futures contract in Hong Kong earlier this year, while the
Singapore Exchange launched a 25 kg contract last
(Editing by Alan Raybould)