China’s Shanghai Gold Exchange is Now an International Player

OWNx Team Gold & Silver Market, News & Commentary

April, Financial Literacy Month, is often seen by those in the financial sector as an opportunity to educate people on how to manage their money within an existing financial system. At OWNx, we take a different approach by helping you understand what the role of gold and silver will be in the financial system of the future.

Monumental shifts have occurred in the global gold market over the last decade. FinTech has provided improved flexibility in global payments and how gold can be used as money. Geopolitics and global economic trends that have been in place for decades are shifting, restoring one of gold’s traditional roles as geopolitical and financial insurance. Some of these changes happen quickly. Others occur slowly and go unnoticed for years until an event occurs that signifies a major milestone has been reached.

Such was the announcement two weeks ago that the Dubai Gold and Commodities Exchange (DGCX) launched a gold futures contract. This contract a) is traded internationally, b) is denominated in the Chinese yuan, and c) uses the Shanghai Gold Exchange as the Benchmark to set the contract price. What this means is the world now has a means to trade gold futures outside of the US dollar.

In announcing this new gold market exchange, Ahmed Bin Sulayem, Chairman of the DGCX and Executive Chairman of DMCC, said: “The listing of the Shanghai Gold Futures contract on DGCX is a landmark development. With the launch of this contract, all key bullion price indicators are accessible on a single platform, with significant margin efficiencies. We are delighted to further this partnership with the Shanghai Gold Exchange, today the largest bullion market in the world.”

The Shanghai Gold Exchange is the largest bullion market in the world, which makes sense because China is the world’s #1 gold mining and import country. Giving international traders the ability to trade futures on this market in something other than US dollars is indeed a landmark development.

The SGE was founded fifteen years ago in 2002 as a means to begin to weaken the monopoly that the London Bullion Market Association held over the global gold market. This month’s announcement is a major milestone toward accomplishing that task. Initially it will provide price, supply, and demand for the Chinese market. Over time, it will have an impact on all of Asia, and eventually the global price of gold. How long it will take to impact the global price of gold is as yet unknown.

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