China Debuts of International Gold Market Early

September 17th, 2014 by

The launch of the international gold market in the Shanghai Free Trade Zone has been moved up 11 days to Thursday, September 18th.

This is Beijing’s next step in moving the “center of gravity” of gold price discovery from London to Asia. Contracts in this new yuan-denominated gold market can settled in cash (yuan,) or physical delivery can be taken at three different locations within the Free Trade Zone. Contracts will range in size from 100 gram to “Good Delivery” 400 troy oz (12.5kg) sizes, with the 1 kilogram contract expected to be the most popular. Most of the major players in the Western gold market have already signed on with the Shanghai Exchange.

This new bourse, run by the Shanghai Gold Exchange, gives foreign investors a chance to use “offshore yuan” to participate in China’s gold market. China is not only the world’s #1 gold-producing nation, it is also the world’s #1 gold importer. Practically no gold is exported from China, and between 2100 and 2500 metric tons was imported last year. Exact figures are hard to determine, as China keeps any gold purchases by the central bank a state secret.

gold investor

In related news, the CME Group, who runs the COMEX, Nymex, and the new silver fix, is planning to launch a 1 kg gold futures contract in Hong Kong before the end of the year, with physical delivery available. The gold association in Hong Kong has been granted a license to build a gold vault in mainland China — the first non-Chinese entity allowed to do so. The 1,000 metric ton vault will be located in the free trade zone in mainland China just opposite of Hong Kong.

In Singapore, the international 25kg gold contract that was supposed to launch this month has been pushed back to October, due to technical issues.