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Section: Daily Dispatches

Giving Gold a Foreign Touch

By Yu Qiao
China Daily, Beijing
Tuesday, November 30, 2004

An executive of Shanghai Gold Exchange yesterday
said that China's sole national gold bourse has made
submissions to the central bank to attract foreign
gold traders.

"We are striving to invite qualified international banks
and gold firms to directly conduct transactions in our
exchange," said Wang Zhe, general manager of the
gold exchange.

"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
outlook, infrastructure support, and market
development in Beijing.

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

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

"However, the gold exchange is close 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 pilot individual gold
investment business at the gold exchange in October.

Albert Cheng, managing director of the World Gold
Council's Far East operations, yesterday suggested
Chinese 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 gold council predicts that gold demand in
China will grow to 600 tonnes annually in coming
years with the opening of gold investment
businesses from around 200 tonnes 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 a
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 will range
between US$390 and US$455 per ounce during
the second half of this year.

World gold prices recently reached a 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
is likely to continue," Walker said.

Gold trade volume in the Shanghai Gold Exchange
rose by 39.53 per cent year-on-year to 257.72
tonnes in the first 10 months of this year.


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Blanchard & Co. Inc.
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Pat Gorman, Proprietor
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Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
Dr. Fred I. Goldstein, Senior Broker



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