China mounts gold liquidity grab as London market reforms


By Clara Denina
Monday, October 19, 2015

VIENNA, Austria -- As the London gold market enters its next phase of reform, a sense of urgency is key because competitors, including commodity consuming giant China, are poised with new products to grab liquidity and global influence.

Global liquidity is shrinking due to persistently low gold prices as the market still struggles to shake off the impact of a seismic crash two years ago. Bruised investors have largely stayed away, while dealing desks have also become smaller.

London, currently the global market nucleus, is re-examining the way bullion is traded after sweeping reform of its price benchmarks.

At the same time, China, the metal's largest consumer and producer, is aiming to become a price setter with its yuan-denominated gold benchmark by the end of 2015, a move that could beat any rivals' effort to increase market share.

"There are too many vested interests and China is likely to win the main prize, because it wants to influence the prices of the commodities it is the biggest user of," one senior London trader said at the opening of the gold industry's annual conference, this year in Vienna. ...

"Central clearing is the way forward, because brokers are finding more difficult to have credit lines open with the few counterparties left, given that many are withdrawing," the head of gold trading at a European bank said. ...

"China is already taking liquidity from the London market and will make its best effort to continue to do so," another trader said. ...

... For the remainder of the report:


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