China is aiming to further influence the gold markets, as the Shanghai Gold Exchange (SGE) received the approval to launch a global trading platform. Foreign banks and gold producers were approached and asked to participate with the SGE, which could shift the dominance from financial centers of New York and London in terms of gold pricing.
The move comes after regulators scrutinize the current London gold fixing benchmark, and fixing member Barclays was fined £26 million in a manipulation scandal. SGE, which is nationalized, asked London gold fixing member banks HSBC Holdings and Bank of Nova Scotia, as well as Standard Chartered, Standard Bank and Australia and New Zealand Banking Group, to join the new platform.
Such a move would increase China’s presence in the gold markets. SGE is already the largest physical gold bullion exchange, where domestic entities buy and sell the precious metal. An international platform would begin to introduce foreign institutions because the ability to import gold remains limited. “China wants to have more voice in gold prices,” said Jiang Shu, analyst with Industrial Bank, one of 12 institutions allowed to import gold into China. Jiang said that the introduction to foreign players would shift Chinese demand from a number to a impacting factor in gold pricing.