China’s international gold investment channels expand

A Chinese international gold exchange has now launched, after the original date was moved ahead 11 days.

The move is part of the country’s aim to liberalise its gold markets and attract more investors from overseas. The news comes as a rival bullion benchmark, set to open in Singapore, was delayed because of technical problems, Reuters reports. An unnamed source told the news provider that the Shanghai Gold Exchange (SGE) international board unveiling was changed due to the inability of some government officials to attend the original date.

The event marks the first time that foreign investors will be able to directly take part in China’s physical gold market, indicating the country is keen to establish itself as Asia’s central trading hub for the precious metal.

A state-run gold bourse, the SGE’s international board was launched in Shanghai’s free trade zone and all 11 physical gold contracts began trading. Earlier Reuters reports suggest interest in the exchange has been high, exceeding expected sign-up numbers.

HK precious metals vault approved

According to the South China Morning Post (SCMP), a further sign of the country’s eagerness to liberalise gold markets is the approval of a precious metals vault in Hong Kong.

The Chinese Gold & Silver Exchange Society will set up the HK$1 billion (AU$142 million) facility in Shenzhen’s Qianhai special economic zone, with the People’s Bank of China and the Shenzhen government giving the green light. Haywood Cheung Tak-hay, president of the society, said China’s central government is clearly “very keen” to open up gold markets to investors abroad.

“China will not remove all restrictions on its gold and currency markets immediately for fear of losing control, but it will allow international investors to trade in the special economic zones,” he told the SCMP.

“Hong Kong has to capture this opportunity. I am discussing with executives of the Shanghai Gold Exchange a potential link-up in the form of a gold through train to allow investors to conduct cross-border trading of gold products between Hong Kong and Shanghai.”

China’s gold market growth

China is now the world’s biggest consumer of gold, with the World Gold Council claiming the country overtook India last year.

According to the organisation’s data, China bought 1,066 tonnes of the precious metal in 2013, an annual rise of 32 per cent. Official figures for the country’s gold holdings have not been released since 2009, but it is widely speculated that the nation has doubled or even tripled its reserves since then.

However, the SCMP noted that just 15 banks were previously allowed to handle gold imports due to mainland capital controls. This has caused a number of problems for Hong Kong jewellers due to administration and logistics issues.

The SGE changes are expected to provide significant benefits for foreign market traders and could prove particularly useful for Australian investors. The two countries’ relative proximity is a positive factor, and Australia offers a steady gold supply, advanced private vaulting services and a stable economic and political environment.

What are your opinions on the new gold bourse? Will it provide new opportunities to Australian precious metal investors?

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