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Ted Butler: Report shows metals dealers closing their short positions
Bank eyes consumer gold rush
By Liu Jie
China Daily, Beijing
Wednesday, June 23, 2004
http://www.chinadaily.com.cn/english/doc/2004-06/23/content_341679.htm
Beijingers yesterday became able to buy and sell gold
bars at a bank, opening a convenient and flexible new
investment tool to help citizens manage their assets.
The China Merchants Bank (CMB) said it had launched
the repurchasable gold bars business in the capital city
and planned to extend it next to Shenzhen. A
step-by-step national roll-out is expected to follow.
CMB is a sales agent for the repurchasable gold bars
processed by CGS Ltd, a joint venture between the
mainland and Hong Kong. The first batch of gold bars
is divided into three specifications: 2-ounce, 5-ounce,
and 10-ounce. All reach 99.99 percent purity.
The buying and selling prices of the gold bars will
fluctuate based on the quotation of the London Precious
Metal Exchange and with reference to the Shanghai
Gold Exchange, China's sole gold market.
Yesterday's buying and selling prices for the gold bars
were 3,272.91 yuan (US$394.33) and 3,279.13 yuan
(US$395.08) per ounce respectively, or 105.23 yuan
(US$12.68) and 105.43 yuan (US$12.7) per gram,
according to the CGS Standard Gold Bar Quotation
released by the company.
CGS declined to disclose the exact amount of gold
they have provided to CMB, but have guaranteed
enough to supply the market.
Huang He, an official of the CMB Beijing Branch, told
China Daily a processing fee would be added to the
transactions of 109 yuan (US$13.13) per ounce for
buying and 62 yuan (US$7.47) per ounce for selling.
Before the business was officially launched in Beijing,
a trial was carried out in Chengdu, capital of Sichuan
Province, last November.
On Nov. 2, the first business day of the repurchasable
gold trial, five outlets of CMB Chengdu sold a total of
4,167 grams of gold. The transaction volume reached
460,000 yuan (US$55,422), with the selling price set
at 107.05 yuan (US$13) per gram on the day.
A CMB expert estimated the yield of a repurchasable
gold bar transaction might reach 5 percent on average.
"We are cautious about expanding the business and
will concentrate on nurturing it. That is why we do not
expect quick and high returns in the primary stage,"
said Gao Li'ang, general manager of CGS Ltd.
Meanwhile, the company and CMB will jointly provide
more investor services and derivative financial products,
including an on-line business and gold mortgages.
Small-sized gold bars have been available to Chinese
people since November 2002, when department stores
in Beijing, including China Art and Crafts Plaza,
Guiyou Plaza's Jianguomen and Fangzhuang outlets
and the Caishikou Department Store, were allowed to
sell gold bars to individual consumers.
"The gold transactions in the bank are more standard
and convenient than in the department stores, given
the bank's reliable financial support and rich financial
management experience," said Xu Shouxin, deputy
secretary-general of the China Gold Association.
The majority of the gold bars sold in department
stores are for decoration and commemoration, and
attract higher processing charges than the standard
gold bars.
Prior to CMB, the Bank of China Shanghai Branch
kicked off "Gold Treasure" -- a paper gold business
-- last November, which has witnessed transaction
volume growth of 40 percent month-on-month.
So far, four State commercial banks have submitted
applications to open gold transaction businesses to
the China Banking Regulatory Commission.
The Shanghai Gold Exchange will issue 50-gram
gold bars for trial next Monday. Currently, the
smallest bars traded are 1 kilogram.
"The new product is to meet the requirements of
individual investors and further accelerate transactions
in the market," said an official of the Shanghai Gold
Exchange.
Liu Shan'en, an expert at the Beijing Gold Economics
Research Centre, told China Daily the businesses were
all eyeing the huge potential in the gold investment
market.
"Currently, the nation's deposits stand at 10.3 trillion
yuan (US$1.24 trillion). After liberalization of the market,
the capital flowing into the gold investment market is
estimated to be between 60 billion yuan (US$7.23
billion) and 200 billion yuan (US$24.10 billion),
according to our research," said Liu.
Statistics from the China Gold Association showed that
China is the third-largest gold consumer and the
fourth-largest producer internationally. China consumed
230 tons of gold in 2003, and produced 200 tons of gold.
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