You are here
Hong Kong starts trading gold in renminbi
Depositors in Hong Kong Can Now Convert Their Idle Renminbi Deposits Into Gold
By Nick Ferguson
Finance Asia, Hong Kong
Monday, October 17, 2011
Hong Kong's Chinese Gold & Silver Exchange Society officially starts trading gold denominated in renminbi today, in a bid to attract the HK$600 billion of Chinese currency sitting on deposit in the city’s banks.
Haywood Cheung, president of the 101-year-old bullion exchange, said the so-called Renminbi Kilobar Gold contracts could boost trading volumes by up to 30%, or HK$40 billion a day, during the next six months. Growth has already been strong this year, with average daily electronic transactions reaching HK$136 billion after a full-year average of just HK$31 billion in 2010.
"By attracting both local and international investors, the Renminbi Kilobar Gold is a significant step towards internationalising the renminbi," said Cheung. "It also consolidates Hong Kong's position as an offshore renminbi centre by providing investors with a new alternative in leveraged trading of renminbi."
Investors who choose to convert their renminbi bank deposits into the new gold contracts can gear up their exposure to the currency by as much as 25 times. During a visit to the exchange on Friday, Cheung told FinanceAsia that this ability to use leverage will prove attractive to investors, who until now have lacked opportunities to put their renminbi to work.
... Dispatch continues below ...
The United States Once Again Can Establish a Stable Dollar Worth Its Weight in Gold
Lewis E. Lehrman, chairman of the Lehrman Institute, sponsor of The Gold Standard Now project, has released a plan to restore economic growth through a stable dollar.
The plan, titled "The True Gold Standard: A Monetary Reform Plan Without Official Reserve Currencies," responds to the recurrent economic crises of the last century and outlines a detailed proposal for America's leadership on "how we get from here to there." That is, how we get from the present unstable paper dollar to a stable dollar as good as gold.
James Grant, author and editor of Grant's Interest Rate Observer, says of the Lehrman plan: "If you have ever wondered how the world can get from here to there -- from the chaos of depreciating paper to a convertible currency worthy of our children and our grandchildren -- wonder no more. The answer, brilliantly expounded, is between these covers. America has long needed a modern Alexander Hamilton. In Lewis E. Lehrman the country has finally found him."
To learn more and to sign up for The Gold Standard Now's free, noncommercial, weekly report, "Prosperity through Gold," please visit:
It also helps that gold and renminbi are both headline-grabbing investment trends. Cheung reckons they still offer value, arguing that gold is just half-way through a 10 to 15-year bull cycle and that renminbi will appreciate by 5% to 6% a year before it becomes freely convertible. That is an appealing proposition compared to moribund returns on bank deposits.
Some critics have argued that the exchange will face tough competition from the Chinese mainland. Shanghai already hosts onshore trading of gold contracts and, according to sceptics, continued liberalisation of the domestic market will make it easier for Chinese investors to bypass Hong Kong.
In response, Cheung noted that China is actively promoting Hong Kong as an offshore renminbi centre and the city enjoys a big advantage through its established role as a trusted international financial centre. Far from leaving the exchange, Chinese investors have increased their share of trading on the CGSE to 50% to 60%, up from around 30% at the start of the year.
It is also possible that the Hong Kong and Shanghai bullion exchanges could cooperate in the future as the two societies have adopted the same standards with regards to purity. "When they open up, I think we can be very good associates," said Cheung.
In the medium term, the exchange is even planning to launch an initial public offering of its shares to make it easier to secure international deals. "We have the vision, for sure," said Cheung. "An IPO will allow us to have more international partners. International institutions want to be able to have an exit from their investment when they come in, but right now I don't have that because the exchange is private."
Trading of the Renminbi Kilobar Gold contracts will start with 25 of the exchange's member firms from various sectors, including banking and gold dealing, with Wing Hang Bank and Bank of China acting as settlement banks. The spot gold contracts are traded under the revamped electronic trading system established by the CGSE and quoted and settled in renminbi. Starting from today, members can take physical delivery of the gold upon settlement.
* * *
Join GATA here:
The Silver Summit
Thursday-Friday, October 20-21, 2011
Davenport Hotel, Spokane, Washington
New Orleans Investment Conference
Wednesday-Saturday, October 26-29, 2011
Hilton New Orelans Riverside Hotel
Support GATA by purchasing gold and silver commemorative coins:
Or by purchasing a colorful GATA T-shirt:
Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:
Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon:
Help keep GATA going
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Be Part of a Chance to Discover Multi-Million-Ounce Gold and Silver Deposits in Canada
Northaven Resources Corp. (TSX-V:NTV) is advancing five gold and silver projects in highly prospective and politically stable British Columbia, Canada.
Check out the exploration program on our Allco gold/silver project :
-- A large (13,000 hectare) property, covering more than 15 square kilometers of a regional mineralized trend just 3km from a recently announced 1.2-million-ounce gold and 15-million-ounce silver deposit.
-- The property hosts historic high-grade silver workings and many mineral showings as well as former mines at the property's northern and southern boundaries.
-- A deep-penetrating airborne geophysics survey has just been completed on the entire property and neighboring deposits and its results are eagerly awaited.
To learn more about the Allco property or Northaven's other gold and silver projects, please visit:
Or call Northaven CEO Allen Leschert at 604-696-3600.