Hong Kong Gold and Silver Exchange seeks warehouse in China


By Polly Yam
Tuesday, November 13, 2012


HONG KONG -- Hong Kong's Chinese Gold & Silver Exchange Society (CGSE) is in initial talks with Chinese officials to set up a bonded warehouse on the mainland in a bid to boost business with exchanges and traders there, its president said on Tuesday.

The CGSE is a leading physical gold marketplace in Asia. President Haywood Cheung said the CGSE was seeking to set up a warehouse for gold and silver in Qianhai, a new financial zone in the southern city of Shenzhen.

"We are definitely interested in setting up warehouses in the mainland," Cheung told Reuters in an interview. "Officials for Qianhai have said that initially this can be considered and is a good idea."

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China does not currently allow foreign exchanges to set up storage on the mainland, and the CGSE is considered a foreign entity. This policy, however, is expected to change soon.

The central government is also expected to allow the Qianhai zone, near Hong Kong, to implement special policies to encourage investment.

Up to 25 percent of the CGSE's trade came from the mainland in 2011 and this figure is expected to rise to between 25 percent and 30 percent this year, Cheung said.

In a bid to further boost business and liquidity in the mainland, the CGSE is also in talks with the Shanghai Gold Exchange, China's leading physical gold marketplace, to pool accredited gold bar providers, Cheung added.

To expand its silver business, the CGSE plans to launch an electronic platform to trade the precious metal in Hong Kong dollars in the first quarter of 2013. It currently offers electronic trading for Loco London gold and silver, which are denominated in U.S. dollars, and the Renminbi kilobar gold.

Asked about his outlook for precious metals, Cheung said he expects spot gold prices to rise to $2,000 an ounce in the first quarter of next year, an increase from current prices of about $1,700-$1,800 an ounce.

Cheung also expects silver prices to rise to around $40 an ounce in the first quarter of next year, from about $32 an ounce currently.

"If precious metals investors believe metals prices would rise, they would pick silver now because gold prices are already high," Cheung said, adding that jewellery manufacturers in Asia were using more silver and platinum in their products, boosting physical demand.

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