Updated 11:29 AM EDT, Tue, Jun 16, 2020

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Yuan Gold Fix to Boost China's Influence on the Global Market

Yuan gold fix launched in China to boost influence in the global market

(Photo : Getty Images/ China Photos) China attempts to be a global gold price setter by launching a Yuan-denominated gold price fix

Being the world's top gold producer, China launched a Yuan-denominated gold price fix on Tuesday in its attempt to become a price setter in the London and New York markets.

The Shanghai Stock Exchange derived the gold benchmark on a 1-kilogram contract and was fixed at 256.92 yuan per gram, Reuters reported.

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According to Bloomberg, 18 trading members will be setting the benchmark twice a day.

Twelve companies will take part in the gold benchmark price fixing namely the: Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, Shanghai Pudong Development Bank, Ping An Bank, Bank of Shanghai, Standard Chartered Bank(China),Australian and New Zealand Bank while the remaining 6 companies - China National Gold Group Corp, Shandong Gold Group, Shanghai Lao Fen Xiang, Chow Tai Fook, Bank of China (Hong Kong) Ltd and MKS (Switzerland) SA will serve as reference price members of the gold benchmark.

China's goal is to increase its influence in the global market while making the yuan a viable competitor to the US dollar. However, some analysts think that the new fix won't affect the global pricing benchmarks on London and New York immediately. On the upside, the analysts believe that a fully convertible Chinese Yuan will most likely boost Beijing's pricing power in the London Bullion Market Association.

Marwan Shakarchi, chairman of Swiss Trading House MKS, said that the ever increasing gold consumption in China supports the set-up of the fix.

"To have a benchmark price in renminbi will help both consumers and producers in this part of the world," said Shakarchi.

Shakarchi pointed out that even though the gold fix can only apply to a closed monetary system for the moment, other opportunities will come as soon as the Yuan reaches full convertibility.

"Ultimately, I see them uniting the (offshore yuan) CNH and CNY (onshore yuan). The currency will be fully convertible and it will be easier to import gold into China," he added. 

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