China lowers gold trading threshold for small private investors

In an effort 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 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. A total of 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 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 U.S. dollars) threshold turned off many private investors.

The volume of spot transactions by private investors in the first 10 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 by the People's Bank of China.

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.

Source: Xinhua