ICBC Considers London Gold Fix as Shanghai Preps Yuan Price

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Industrial & Commercial Bank of China Ltd. became the latest Chinese bank to consider joining the auction process that sets gold prices in London as a yuan-based fix is on track to start in Shanghai this year.

ICBC is looking at either joining the London process directly or through its U.K.-based Standard Bank Plc unit, Zhou Ming, general manager of the precious metals department at ICBC, said at a conference Thursday in Shanghai. Bank of China Ltd. last week became the first Chinese bank among the 10 participants in the twice-daily auction.

“It will greatly benefit the London gold fix to include the Chinese banks as China is the world’s largest gold consumer now,” said Jiang Shu, chief analyst at Shandong Gold Financial Holdings Capital Management Co. A separate yuan-denominated gold price in Shanghai “in the future may present some competition to the London fix.”

China is boosting its influence in global commodities and currency markets as it seeks to make the yuan a viable competitor to the dollar. The country saw a surge in commodities-derivative trading last year and policy makers are making a case to add the yuan to the International Monetary Fund’s basket of reserve currencies.

“We Chinese banks want to expand our reputation and brand influence in the Western market,” ICBC’s Zhou said.

Yuan Fix

Increased participation by Chinese banks in London comes as China’s gold bourse prepares its own yuan-denominated gold auction. The Shanghai Gold Exchange applied to the People’s Bank of China for approval of its pricing system and plans to start by year end, Shen Gang, SGE vice president, said Thursday.

London’s new gold pricing process started earlier this year as a more transparent alternative to a previous method in which banks participated by phone. London is the world’s largest market for over-the-counter gold trading with an average of $20.2 billion in the metal changing hands each day in April, clearing data from the London Bullion Market Association show.

More Chinese banks are seen taking part in the new London gold pricing auction, Grant Angwin, chairman of the LBMA, said on the sidelines of the conference. China Construction Bank Corp. is expected to join as a member “in the coming weeks,” Intercontinental Exchange Inc. said Monday.

China’s gold consumption may rise to as high as 1,000 metric tons this year if the country’s stock market reverses its rally and investors seek haven investments, Roland Wang, China director of the World Gold Council, said Wednesday. The country consumed 973.6 tons last year, according to the WGC.

Bullion gained 0.1 percent to $1,176.59 an ounce as of 8:24 a.m. in London, according to Bloomberg generic pricing. Prices are down 0.7 percent this year.

For more, read this QuickTake: The People’s Currency

— With assistance by Alfred Cang, and Feiwen Rong

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