Trade zone's new gold board 'gets off to slow start'
One week after the Shanghai Gold Exchange started trading in the
China (Shanghai) Pilot Free Trade Zone, transactions on the
international board have been scant compared with international peers.
But analysts said it is still too early to assess the board's
operations.
The SGE's international board for the first time enables
international investors to invest directly in China's gold market, and
it has been widely seen as part of the country's effort to open its
financial markets and gain more say in the pricing of the precious
metal.
Three contracts are offered: 100 grams of bullion of 99.99 percent
purity (iAu100g), 1 kg of the same purity (iAu9999) and 12.5-kg bars of
99.5 percent purity (iAu99.5).
According to exchange data, trading of the iAu9999 contract was the
most active of the three, with transactions involving a little over
1,000 contracts on Thursday.
By contrast, the London Metal Exchange recorded 23,857 contracts of physical gold traded on the same day.
Analysts said that uncertainties over exchange rates and gold prices
may have prompted the SGE's international board members to hold cash.
All three contracts offered by the SGE's international board are
yuan-denominated and physical gold-backed, so investors need to take
risks into account before they decide to trade in the exchange, said
Yang Fei, an analyst at Seewonder Financial in Shanghai.
Xiao Shen, a Shanghai-based precious metals researcher with Dingjin
Precious Metal, said: "Currently, only FTZ-registered members can trade,
and they need to have accounts at banks registered in the free trade
zone and authorized by the SGE to make transactions. The exchange is not
yet open to individual traders, and many players have not entered the
market. As more members are involved, the trading volumes may increase."
Trading volumes and transaction values are benchmarks to evaluate an
exchange's activity.
Albert Cheng, World Gold Council managing director for the Far East,
said that the board should aim to become a key trading platform in Asia.
Xiao said: "It would be unreasonable to expect a new exchange to
become a big player in just a week and compete with other exchanges that
have century-long histories. Let's be patient to see how the SGE's
international board evolves."
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