The beginning of gold trading by individual investors on the
Shanghai Gold Exchange (SGE) later this month is expected to
provide a welcome alternative at a time of high stock market
volatility.
The SGE has said it will open the physical gold market to
individual investors in addition to paper gold. Trading in physical
gold has so far been limited to professional traders.
Individual investors will be allowed to trade in the exchange's
current physical gold products of Au99.99 and Au100g purity.
The minimum lot for trading has been set at 100 grams. Based on
the closing price of 161 yuan per gram for Au100g and 159.30 yuan
per gram for Au99.99 on the SGE yesterday, each lot is valued at
around 16,000 yuan.
It's widely seen as quite a low threshold for individual
investors to participate in the physical gold market.
"The upcoming trading (of physical gold) is expected to be very
active in the near future, for the relatively low threshold would
pull in more individual investors to the market," said Li Jingyuan,
an analyst with Hai Fu Futures Co.
According to the SGE, the maximum trading commission is set at
0.21 percent of the total trading value, with the SGE charging no
more than 0.06 percent and the commercial bank, acting as agent, no
more than 0.15 percent.
A prospective individual investor must first open a trading
account with the qualified commercial bank. The SGE said Industrial
Bank would be the first bank to transact the trading of physical
gold for individual investors. Other banks to be assigned with the
business by the SGE have not been fixed, according to Tong Gang,
spokesman of the SGE.
Analysts noted that trading of tangible physical gold itself
would attract many more individual investors.
"Compared with the previously traded products for individual
investors on the SGE, paper gold for example, the trading enables
investors to deliver tangible physical gold and would hence attract
many investors," said Tang Mingrong, an analyst with Ling Rui Gold
Investment Co.
"The increasing need of hedging risks by individual investors
spurs the launch of physical gold trading," Tang said.
Buying gold is widely seen as an effective way to reduce risks
in an investment portfolio, as gold prices remain relatively more
stable in times of economic and market uncertainties. Concerns
about worldwide inflation also add to the charm of investing in
gold.
"The further opening of the gold market to individual investors
would provide them more investing channels and alleviate the excess
liquidity in the nation's financial market," said Wang Lixin,
general manager of World Gold Council, Greater China.
(China Daily July 4, 2007)