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Exchange starts gold trading via local banks

(Shanghai Daily)
Updated: 2007-06-26 09:03

The Shanghai Gold Exchange will launch individual gold bullion trading nationwide in July by teaming up with Industrial Bank.

The exchange will hold a joint briefing with Industrial Bank about the service in the first part of July, said the gold bourse yesterday.

It will later launch trading through Huaxia Bank. Industrial and Commercial Bank of China is likely be the third player to join the scheme.

Under the plan, individual investors will be able to trade gold from a minimum threshold of 100 grams, which would require about 16,000 yuan (US$2,099) based on yesterday's prices on the bourse.

The main selling point is that investors can take the bullion home at cheaper prices than sold by jewelers and coin makers. For instance, investment-grade bullion commands more than a 10 percent premium in the market.

Lenders including Bank of China and China Construction Bank already offer virtual gold trading, although investors can't hold the actual bullion, instead betting on prices through a special bank account.

The Shanghai branch of ICBC started a trial program of individual gold trading in July 2005, where investors can take bullion home. The branch cut the trading threshold from 1,000 grams to 100 grams last December to boost its market appeal.

Related readings:  Shanghai to set up gold fund company  Gold Exchange is to enroll foreign banks  Gold exchange considers derivatives trading Find more in Markets Watch

B y last Friday, 3,301 investors had opened gold-trading accounts at the branch. Turnover was 6,081.3 kilograms in 2006, and so far this year is 1,476.3 kilograms, the bank said.

The People's Bank of China, the central bank, gave approval for the bourse to start nationwide gold trading services at the end of 2006, the gold bourse said yesterday.

"The pace of opening the market now depends on the system compliance of lenders," said a bourse official. "Our system was ready two years ago."

The bourse said earlier this month that it will join hands with more commercial banks to trade gold for retail investors.

Chinese people have traditionally kept gold bullion on hand as a safe haven to hedge against inflation and as a symbol of fortune. The country is the world's third-biggest consumer of gold.

China deregulated its gold market in late 2002, when the Shanghai Gold Exchange officially started operation to allow gold producers, corporate users and banks to trade the yellow metal.

The exchange now trades gold, platinum and silver. Turnover on gold topped 1,249 tons last year on the bourse, up 37.81 percent from a year previously.