In a move to attract small private investors, China on Monday lowered the
trading threshold at the Shanghai Gold Exchange (SGE) from one kilogram to 100
grams.
SGE sources said 100-gram gold bars, which debuted on Monday at an initial
price of 160 yuan (20.5 U.S. dollars) per gram, started spot trading at an
opening price of 157 yuan per gram and then remained flat for the entire trading
session, closing at 157 yuan per gram, a drop of three yuan.
During Monday's trading, only 0.4 kg or four gold bars of this type changed
hands, and transactions amounted to only 62,800 yuan.
However, business was brisk for other types of gold. 2,359 kg of two other
conventional types of gold were traded and 1,506 kg of gold listed for trading
delay (T+D).
An SGE spokesman blamed the poor market performance of the newly premiered
100-gram gold bars on a the Christmas holiday season.
Industry experts still believe China's latest move will help diversify gold
investment channels in the country and standardize the market for gold
transactions.
In July last year the SGE proposed spot trading of gold by private investors
in cooperation with the Industrial and Commercial Bank of China (ICBC). However,
the one-kg 160,000 yuan (20,000 US dollars) threshold turned off many private
investors.
The volume of spot transactions by private investors in the first ten months
accounted for just 0.57 percent of total trading.
The Provisional Measures Regarding the Administration of Spot Trading of Gold
by Private Investors published by the SGE stipulate a private investor can
participate in spot trading and even claim gold at designated warehouses in
Shanghai, Beijing and Shenzhen via any SGE financial members or other agents
approved bythe People's Bank of China.
SGE will charge private investors a fee of 0.06 per cent plus commissions
with a maximum of 0.15 per cent, say the provisional rules.
Wong Hasang, a native of Hong Kong and chairman of the board ofGuizhou
Xixibao Mining Co., said the lower SGE threshold would lure more small private
investors to spot trading of gold but that he himself was not interested for the
time being.
"Investing in gold is not for the faint-hearted," said Wong. "You need to
have a speculative frame of mind because the risk in investing in gold is high."
Wong said he followed the gold market assiduously because many of his friends in
Hong Kong invest in gold.
Cheng Fumin, president of the China Gold Association, said sales of gold had
risen since the beginning of the year.
Sales of gold bullion and gold bars account for more than one tenth of gross
gold consumption in China.
"I think more investors will be attracted to spot trading and the number of
transactions will increase as the SGE opens its doors wider," said Cheng.
China's gold market is currently restricted to spot trading, but the SGE has
been developing derivatives such as futures, options and investment funds.
Cheng predicted the country's gold output would exceed 240 tons this year,
with gold sector profits topping 5.5 billion yuan,a record high.
The country produced 169.28 tons of gold in the first three quarters of the
year, a rise of 12.62 tons on the same period last year, and raked in 3.9
billion yuan (about 487 million U.S. dollars) in pre-tax profits, up 52 percent
on comparable figures from last year.
China now ranks third in the world in terms of gold consumption, after India
and the United States.
Song Yuqin, deputy general manager of SGE, said Chinese people are fond of
gold and are keen to keep gold as an asset.
Gold consumption exceeded 300 tons in China last year, 81 percent of which
went to the jewellery-making sector.