The world's first offshore yuan-denominated spot gold market was launched in Hong Kong yesterday, opening a new window for trading the Chinese currency and enabling the city to strengthen its role as a global gold market.
The contract traded at 346.47 yuan (HK$420.18) per gram, or the equivalent of US$1,690.80 an ounce, according to data on the Chinese Gold & Silver Exchange Society's website yesterday morning in Hong Kong. That compares with 347.55 yuan on the Shanghai Gold Exchange and US$1,681.60 in London.
'It provides a new alternative in leveraged trading of renminbi, which has been lacking until now,' said CGSE president Haywood Cheung.
Individual investors can trade kilobar gold, which is priced at 347,000 yuan per unit, by paying a deposit as low as 16,000 yuan. The Chinese Gold & Silver Exchange has 27 members who are designated traders for yuan bullion.
The practice is similar to the margin trading of London gold in Hong Kong, but may carry higher risks as investors also bear the risk of yuan trading. 'The risk of leveraged trading on yuan bullion is twofold - the fluctuation in gold prices and yuan movement,' said Robert Lee, an executive committee member of the exchange.
'We recommend our member traders conduct investment education before selling the product to individual investors,' he said.
Yuan deposits in Hong Kong surged to 609 billion yuan in August, accounting for 10 per cent of total deposits in the city's banking system.