More and more gold traded in Shanghai

In the first ten months of this year, more gold has already been traded on the Shanghai Gold Exchange (SGE) than in the whole of 2013, according to reports Bloomberg. The total trading volume for the period from January to October was 12,077 metric tonnes of gold, but the 11,614 tonnes for the whole of 2013. Xu Luode, chairman of the SGE, said at a press conference on Wednesday that the total trading volume could reach 17,000 tonnes of gold this year. These figures refer to the amount of gold traded on paper and in Chinese yuan, a multiple of the gold that is physically delivered.

Trading in gold contracts on the Shanghai Gold Exchange is growing rapidly, and the volumes seem impressive. Yet, only a fraction of the global trade in gold contracts takes place in China. In the month of October, more than 650,000 troy ounces of 'paper gold' were traded daily on the SGE, compared to an average of 17.4 million troy ounce between participants of the London Bullion Market Association (LBMA).

More gold traded in Asia

The centre of gravity of the physical gold trade is already in Asia, because China and India are by far the largest markets for the precious metal. Every year, hundreds of tons of gold shift from 'West' to 'East'. It is all the more remarkable that the trading of paper claims still determines the price at which physical gold is traded.

"Asia is becoming more and more important and therefore more and more gold will be traded in this region. But at the moment, the centre of gravity is still in London. The reality is that everyone is still using the price of gold in London as a reference price," UBS analyst Wayne Gordon told Bloomberg.

Xu Luode of the Shanghai Gold Exchange sees growth potential for the Chinese gold exchange: "The trading volume may increase further next year, because the Shanghai Gold Exchange also wants to involve brokers in the gold exchange. That could bring in more investors. The SGE also plans to launch a trading platform specifically designed for mobile devices. This platform meets the requirements of today's investors."

More gold traded on the Shanghai Gold Exchange this year