China's sole gold bourse, Shanghai Gold Exchange, announced yesterday that it is asking the central bank to be allowed to open up to foreign traders.

"We want to invite qualified international banks and gold firms to directly conduct transactions in our exchange," said General Manager Wang Zhe.

"The move will build more channels for us to integrate with the international gold market," Wang said yesterday at an international forum on global gold trends, infrastructure support and market development in Beijing.

At present there are 128 domestic traders on the gold exchange, including commercial banks, producers and processors. They conduct spot transactions using renminbi.

The exchange was launched in late 2002, marking a substantial step towards liberalization of the market. Previously, domestic producers had to sell all of their gold to the central bank.

"However, the gold exchange is closed to the international gold market without engagement of foreign traders. Domestic gold prices don't move fully in line with international prices," Wang said.

Integration with the international market will pave the way for the gold exchange to open individual gold investment businesses, he said.

The Shanghai branch of the China Industrial and Commercial Bank started to pilot individual gold investment business at the exchange in October.

Albert Cheng, managing director of the World Gold Council's Far East operations, yesterday suggested regulators should permit commercial banks to carry out gold investment business quickly to meet market demand.

"The construction of an over-the-counter gold trade platform at commercial banks is an important alternative to extend the gold trade platform," Cheng told the forum.

"For the general public, such a trade platform is reliable and convenient, and it can provide extended financial services. For gold producers, this platform can put product sale and business credit together into their own development strategy. These are advantages that are not seen on any other platforms," he said.

The World Gold Council predicts that demand in China will grow to over 660 US tons annually in coming years with the opening of gold investment businesses from around 220 US tons now.

"However, gold investment does not mean speculating in money ... We must make sure that we develop the gold investment market in China for the purpose of providing the Chinese people with a safer means of keeping the value of assets. For healthy development of China's gold investment market, we should weaken the awareness of speculation," Cheng said.

Paul Walker, chief executive officer of GFMS Ltd, the London-based precious metals consultancy, yesterday said that world gold prices are expected to range between US$390 and US$455 per ounce during the second half of this year.

World prices recently reached an 18-year record high of US$455 per ounce, mainly due to the weakening US dollar. "GFMS' base case prophesies a slump in the dollar and surge in (gold) investment likely to continue," Walker said.

Trade volume on the Shanghai Gold Exchange rose by 39.53 percent year-on-year to 284 US tons in the first 10 months of this year.

(China Daily November 30, 2004)