Exchange Traded Funds [+ AddtomyrT China launches renminbi-denominated gold benchmark © Bloomberg yw f = Falo | savetomyrT APRIL 19, 2016 by: Henry Sanderson China has launched a gold price benchmark to compete with London’s almost century-old process as the country secks to have a greater influence over pricing of the precious metal. The world’s largest gold consumer began a twice-daily auction on the Shanghai Gold Exchange on Tuesday. The renminbi-denominated Shanghai Gold Benchmark Price involved 18 banks, including international banks Standard Chartered Bank and Australia and New Zealand Banking Group. ‘The launch could eventually reduce the influence of the London gold price, which started in 1919 when bankers at NM Rothschild & Sons in London sat down to calculate a fair price for gold. That became the global gold benchmark, used by miners, central banks, jewellers and the financial industry to trade gold bars. Last year the London price moved to an electronic auction system, after critics charged the “fix” was opaque and vulnerable to market abuse. In 2014 the Financial Conduct Authority found that a Barclays trader had manipulated the London gold fix and the British bank was fined £26m.“China needs a gold benchmark that reflects local market flows and reduces gold’s price dependency on the US dollar,” Roland Wang, managing director for China at the World Gold Couneil, an industry body, said. “An Asian-focused, yuan- denominated benchmark will significantly increase the liquidity and efficiency of the gold price discovery mechanism.” Commodity pricing is increasingly moving to China, as trading has expanded in its domestic futures contracts. Six of the top 10 globally traded futures contracts are now on Chinese exchanges and prices from iron ore to copper are increasingly set in the country, which is the largest importer of almost all commodities. This year, China’s first crude oil contract is expected to start trading. A number of exchange traded funds and other long-only funds that track commodities are also expected to start, according to Citi, including a fund based on copper and an Exchange ‘Traded Fund tracking agricultural products under consideration by the securities regulator. “Huge increases in open interest and daily trading in Chinese commodity futures markets have had a large impact on global prices, enhancing short-term price volatility and shifting more pricing power to the east,” the bank said. “This trend has primarily played out in base metals and iron ore, with more commodities to be affected in the future.” Gold is up 17 per cent this year on delayed expectations for a rise in US interest rates. It rose 1 per cent on Tuesday to a high of $1,246.4 a troy ounce as the US dollar weakened. Silver jumped 3.5 per cent to $16.78, a 10-month high. Copyright The Financial Times Limited 2017. Allrights reserved. You may share using our article tools. Please don't copy arficies from FT.com and recistrioute by email or post to the web. y f in File & | saveto myer