China Challenges Global Gold/Silver Pricing With SHFE Access

Wed May 28 2025

The Shanghai Futures Exchange (SHFE) announced on Tuesday it will grant overseas investors and brokers direct access to China’s domestic futures market. The exchange unveiled 34 reform proposals covering diverse activities including gold and silver options trading, hedging, and precious metals futures, aiming to “fully introduce overseas participants” and advance the internationalization of the renminbi.

Tiger Shi, CEO of BANDS Financial, stated that this announcement is basically a constitutional change for the entire SHFE opening up. Access for foreign investors to all SHFE products is on a fast track from now on. Key draft proposals include:

1. Allowing foreign brokers and traders to trade directly on the exchange, eliminating the need for onshore intermediaries.
2. Permitting participants to post margins in U.S. dollars and other foreign currencies.

The draft rules are open for public comment until June 4.

Competing for Global Pricing Influence

This move is a strategic step in China’s efforts to enhance its influence over commodity trade pricing. While China dominates the physical production and consumption of commodities like gold and silver, pricing power remains largely dictated by international markets.

On April 21, the People’s Bank of China (PBoC) and three other government departments jointly issued the ” Action Plan for Further Enhancing Cross-border Financial Service Facilitation in the Shanghai International Financial Center.” The plan mandates:

• Supporting the Shanghai Gold Exchange (SGE) in conducting product authorization cooperation with overseas exchanges
• Expanding the application of RMB benchmark prices in mainstream international markets
• Exploring the establishment of an overseas delivery warehouse system

This initiative sets the SGE up to compete directly with the 147-year-old London Metal Exchange (LME).

Surge in China’s Gold Imports

Hong Kong government data released Monday showed net gold flows via Hong Kong to mainland China reached 43.5 metric tons in April, marking a significant increase from March’s 4.9 tons and hitting a 14-month high. Total imports via Hong Kong surged 178% month-on-month to 58.6 tons.

Soni Kumari, commodity strategist at ANZ, explained that China’s gold imports were subdued in Q1 due to relatively low domestic premiums. Higher premiums in April stimulated the import surge, with central bank purchasing demand also acting as a key driver.

Data from China’s General Administration of Customs on May 20 corroborated this trend: Despite gold prices hitting a record high of $3,500 per ounce in April, China’s total gold imports reached an 11-month peak of 127.5 metric tons, rising 73% from March. Industry sources revealed the PBoC issued additional import quotas to some commercial banks that month to meet strong institutional and retail investment demand amid peak U.S.-China trade war anxiety.

Source: https://nai500.com