The Bank of China headquarters are located in the Xidan District of Beijing. (Photo : www.bloomberg.com)
The benchmark administration of Intercontinental Exchange (ICE) has announced on June 16, Tuesday, that it has approved Bank of China to participate in the gold auction which is used to determine the London Bullion Market Association (LBMA) gold price, a benchmark physical gold price in the world.
The bank stated that it was the first Chinese and Asian bank to be given direct participation in the gold price auction, according to the statement released by ICE.
The London gold market has long been recognized as the global spot gold pricing center, and the LBMA gold price is widely used in settlements between producers, consumers and financial institutions, as well as an important pricing benchmark for gold derivative contracts.
Since taking over the administration of the gold auction, IBA has increased the number of direct participants and significantly raised auction volumes.
"We are delighted to welcome Bank of China to the gold auction. The growth in daily volumes coupled with the increase in participation from around the globe demonstrates strong market support for the independent governance and oversight we have implemented to bring transparency and trust to the gold price auction," Finbarr Hutcheson, president of the ICE benchmark administration, said in a statement.
Data showed that average daily volumes for the morning and afternoon gold auctions have more than doubled, compared with the five months before the agency took over the administration.
Sun Yu, CEO at Bank of China (U.K.) Ltd., welcomed the development and said that the bank was proud to become the first Chinese and Asian bank to directly participate in the gold auction.
"Despite being the world's largest gold producer and consumer, China has never played a major role in the global gold fixing," the CEO said.
Sun Yu said that the bank will help strengthen the connection between the Chinese domestic market and overseas markets, make the international gold price reflect the supply and demand in China, as well as promote the internationalization of the Chinese gold market.
Bank of China has been actively involved in the gold trading business in London for more than 40 years. Its first overseas branch was set up in London and in 1987, the bank joined the LBMA as an initial member. It became the only Chinese bank with membership for the succeeding 20 years.
Analysts said that products based on the LBMA gold price can now be developed and delivered, which will reduce costs for clients and provide more transparency in the transaction process.
