viernes, 19 de junio de 2015

viernes, junio 19, 2015

Bank of China Becomes First Chinese Bank to Help Set Gold Price

Move is part of country’s push into global financial markets

By Ese Erheriene

Updated June 16, 2015 11:57 a.m. ET
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Bank of China is to participate in the twice-daily electronic auctions that set the LBMA Gold Price benchmark. Bank of China is to participate in the twice-daily electronic auctions that set the LBMA Gold Price benchmark. Photo: Reuters        

A Chinese bank will for the first time join the group of lenders that sets global gold prices, marking another step in China’s push for a bigger role in international financial markets.

Bank of China Ltd. BACHY -0.93 % , one of China’s big-four state-owned lenders, will participate in the twice-daily electronic auctions that set the LBMA Gold Price benchmark, the London Bullion Market Association said Tuesday.

“Although...the world’s largest gold producer and consumer, China has never played a major role in the global gold fixing,” said Yu Sun, Bank of China’s U.K. general manager. “Bank of China’s direct participation in the gold auction would reinforce the connection between the Chinese domestic market and overseas markets.”

China vies with India as the largest consumer of gold, and together the two countries make up more than 50% of global demand. China is the world’s biggest importer of the yellow metal, as it consumes more than three times the amount of gold it produces. Demand for gold in China fell to 273 tons in the first quarter, down 7% from the year before, as cooling economic growth and caution among bargain hunters curbed consumer appetite, according to the World Gold Council.

China is taking major steps to open up its financial markets to attract foreign investors, as well as urging its own companies and individuals to invest abroad. The government wants to use this modernization of its financial system to help stimulate broader economic growth, which has faltered recently.

Last month, The Wall Street Journal reported that Beijing is considering relaxing controls on Chinese businesses and individuals to buy foreign stocks, bonds and real estate directly.

The Asian powerhouse also wants its currency, the yuan, to be used more widely around the world. It has been pushing the International Monetary Fund to declare the yuan as an official reserve currency, which would put it on a par with global powerhouse currencies such as the dollar, euro and yen.

In metals markets, Hong Kong Exchanges and Clearing 0388 -1.60 % Limited, one of the largest global exchanges, launched late last year yuan-denominated futures contracts for some industrial metals such as aluminum, zinc, and copper. Its industrials metals unit, the London Metal Exchange, signed agreements with China Merchants Group Ltd. and China Construction Bank Corp. CICHY -0.82 % to explore ways of expanding in Asia, and of spreading the use of the yuan.
 
The efforts in metals markets haven’t been without some setbacks. A scandal at a warehouse in the port city of Qingdao, in which banks allegedly pledged metal multiple times as collateral on loans, has given some pause for thought. But broadly the globalization trend remains intact.

“We’ve seen the Chinese government making moves in different markets and the gold market has just been the latest financial market in which the government is trying to open up and be more transparent,” said Simona Gambarini, a commodities analyst at Capital Economics in London. “It’s going to be slow steps, but it’s in the right direction and it seems a consistent move across all markets.”

The move by Bank of China to join the gold price was broadly welcomed by gold market participants, who said it would lead to more trading volumes and greater price transparency. It will join UBS AG, Goldman Sachs Group Inc., and J.P. Morgan Chase JPM 0.68 % & Co.

Bank of China’s presence “adds more kudos to the new mechanism,” said David Govett, head of precious metals at Marex Spectron.

The new twice-daily electronic fixes were launched on March 20, with the Intercontinental Exchange Inc. ICE -1.29 % as administrator, to make the benchmark less vulnerable to manipulation. The old telephone-based system was dropped after regulatory investigations into benchmarks following the manipulation of the London interbank offered rate, or Libor, as well as the gold market itself.

In May 2014, the U.K.’s Financial Conduct Authority fined Barclays BCS -0.03 % PLC £26 million ($43.9 million) for failing to manage conflicts of interest after one of its traders manipulated the gold benchmark at the expense of a client. From April 1 this year, the FCA extended its oversight to cover various benchmarks including gold.

Meanwhile, The Wall Street Journal has reported that in the U.S., officials are investigating at least 10 major banks for possibly rigging precious-metals markets. Citing people close to the inquiries, the report said prosecutors in the Justice Department’s antitrust division are examining how prices for gold, silver, platinum and palladium are set in London, while the Commodity Futures Trading Commission has opened a civil investigation.

The LBMA responded to the scrutiny with a dash to modernize all of the daily fixes for the four main precious metals, moving them onto electronic platforms with independent administrators. In August, the silver price was the first to be changed, under a system managed by CME Group Inc. CME 0.06 % and Thomson Reuters Corp. TRI -0.06 % , closely followed by the platinum and palladium prices in December, managed by the LME.

According to Adrian Ash, head of research at online investor BullionVault, Bank of China’s decision to get involved in the gold price sends a positive signal that the reforms are working.

“Now that this is a regulated benchmark with criminal sanctions, if anything it’s a vote of confidence in the new process and in Bank of China’s ability to meet the regulatory requirements,” he said.

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