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China developing global gold exchange

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China is actively recruiting foreign banks and gold producers to join a new global gold exchange based in Shanghai, according to a report by Reuters.

This is a clear signal that the world's top producer and importer of the precious metal is looking to exert a greater influence over gold pricing.

The move follows last week’s revelation that the U.K. Financial Conduct Authority found Barclays was guilty of falsely manipulating the gold price over a period almost 10 years.

During the same week, the Shanghai Gold Exchange (SGE) received permission from China’s central bank to launch a global trading platform in the Shanghai’s pilot free trade zone.

The move is widely seen as a challenge to New York and London’s dominance in the gold trade and gold pricing.

According to Reuter, the state-backed SGE has asked bullion banks such as HSBC, Australia and New Zealand Banking Group, Standard Bank, Standard Chartered and Bank of Nova Scotia to take part in the new global trading platform.

SGE already operates the biggest physical gold exchange in the world, domestic banks, miners and retailers buy and sell gold. Sources indicated that the platform could be opened to foreign gold brokerages and gold producers.

"China wants to have more voice in gold prices," said Industrial Bank analyst Jiang Shu. "The international exchange is the first step towards gaining a say in gold pricing."

"If you don't allow foreign players to participate in your market actively, or do not push Chinese financial institutions to participate in the international market, then China's strong gold demand is only a number, not a power," he said.

Industrial Bank is one of 12 banks currently allowed to import gold into China.

“Currently, the London gold ‘fix’ is the benchmark for spot prices, while New York's COMEX contract sets the futures' benchmark,” wrote Reuters’ A. Ananthalakshmi.“SGE prices are tracked to gauge Chinese demand as reflected in premiums or discounts to spot rates.”

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