beefsteak
22nd October 2011, 10:03 PM
Renminbi Kilobar – Another Sign of China's Growing Role in the Gold Market
by Alena Mikhan and Andrey Dashkov
This week the Chinese Gold & Silver Exchange Society (CGSE) – a bullion exchange based in Hong Kong – started trading gold quoted in Chinese yuan. The contract, called Renminbi Kilobar Gold, is promoted as offering investors a "double safe haven" – exposure to both gold and an appreciating currency.
This line of thought nicely accompanies China's intention to boost the yuan's international appeal. It is expected that this product will attract retail and institutional investors alike from both the Chinese mainland and overseas.
Whether or not the yuan can deliver its part of the "double safe haven plan," Renminbi Kilobar Gold trading in the first day was strong, with 322 traded gold contracts totaling 112 million yuan (or US$17.5 million). The settlement price ended up at 346.95 yuan per gram, or $1,693.9 an ounce.
This is yet another sign of how fast the gold investment sector is growing in China. In 2010 investment was up 70% over 2009. In Q1 and Q2 2011 gold investment rose by 123% and 44% over the same quarters of 2010 respectively. At such a pace, the Chinese market seems to be swallowing virtually every ounce of gold it is offered. Haywood Cheung, President of the CGSE, expects their new product to boost these already-growing volumes.
To make trading convenient for overseas investors, trading hours have been set for 8 a.m. to 3:30 a.m. the next day, Hong Kong time. Traders may choose to settle their trades either in cash or with spot gold delivery. Also, there is apparently a mechanism for investors to buy with US dollars.
The main goal of this investment tool seems to be promotion of the Chinese currency across the region and on the global scale. However, the impact – intentional or otherwise – on Chinese demand may potentially have positive implications for the price of gold.
http://www.caseyresearch.com/cdd/invest-gold-and-chinese-renminbi
by Alena Mikhan and Andrey Dashkov
This week the Chinese Gold & Silver Exchange Society (CGSE) – a bullion exchange based in Hong Kong – started trading gold quoted in Chinese yuan. The contract, called Renminbi Kilobar Gold, is promoted as offering investors a "double safe haven" – exposure to both gold and an appreciating currency.
This line of thought nicely accompanies China's intention to boost the yuan's international appeal. It is expected that this product will attract retail and institutional investors alike from both the Chinese mainland and overseas.
Whether or not the yuan can deliver its part of the "double safe haven plan," Renminbi Kilobar Gold trading in the first day was strong, with 322 traded gold contracts totaling 112 million yuan (or US$17.5 million). The settlement price ended up at 346.95 yuan per gram, or $1,693.9 an ounce.
This is yet another sign of how fast the gold investment sector is growing in China. In 2010 investment was up 70% over 2009. In Q1 and Q2 2011 gold investment rose by 123% and 44% over the same quarters of 2010 respectively. At such a pace, the Chinese market seems to be swallowing virtually every ounce of gold it is offered. Haywood Cheung, President of the CGSE, expects their new product to boost these already-growing volumes.
To make trading convenient for overseas investors, trading hours have been set for 8 a.m. to 3:30 a.m. the next day, Hong Kong time. Traders may choose to settle their trades either in cash or with spot gold delivery. Also, there is apparently a mechanism for investors to buy with US dollars.
The main goal of this investment tool seems to be promotion of the Chinese currency across the region and on the global scale. However, the impact – intentional or otherwise – on Chinese demand may potentially have positive implications for the price of gold.
http://www.caseyresearch.com/cdd/invest-gold-and-chinese-renminbi