China seeks bigger sway in gold trade

Currently, the London gold "fix" is the benchmark for spot prices, while New York's COMEX contract sets the futures' benchmark. SGE prices are tracked to gauge Chinese demand as reflected in premiums or discounts to spot rates.

Earlier this year, China's ICBC - in conjunction with its acquisition target Standard Bank - indicated interest in buying Deutsche Bank's seat on the London gold fix but it is not interested anymore, sources previously told Reuters.

Top 10 consumers of gold in the world

Gold rush in Henan

While physical demand has always provided underlying support to gold prices, speculative trade is what largely drives prices. With China's push for an international physical exchange, physical demand could begin to have a stronger influence.

China overtook India last year as the world's biggest gold importer and gold jewelry and investment demand was up about a third to a record 1,065.8 tons in 2013.

The influx of gold has made SGE the biggest physical exchange, with a turnover of 10,000 tons for its immediate and deferred delivery contracts, according to Thomson Reuters GFMS.

The Shanghai Futures Exchange has the world's second-most traded gold futures contract, though trading is largely limited to the domestic market with volumes of about 41,176 tons last year, still well behind COMEX's 147,083 tons.

The SGE's international board and the main exchange could eventually be merged when the yuan is fully convertible, Albert Cheng, managing director of the World Gold Council's far east region, said.

"That would become a very important exchange in the world, and Shanghai will truly become one of the three international gold centers after New York and London," he said. "No doubt, the participation in the international market is the key effort of the SGE and the current administration."

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