2009年中国贵金属年会发言——

中国黄金市场现状与发展建议

2009年11月   威尔鑫首席分析师   杨易君

各位先生、女士，大家好！今天非常有幸来到这里和大家一起探导黄金行业与黄金市场发展前景。由于我本人工作与黄金交易市场接触比较紧密，所以今天主要就中国黄金市场现状，发表些观点与大家共勉，同时也希望这些观点能为中国黄金市场发展提供些建议。

目前中国黄金市场的构成现状
目前中国黄金市场主要由如下几大市场构成：上海黄金交易所、上海期货交易所、银行纸黄金、金商投资性金条、各种纪念性金条、不成型的国内做市商、海外黄金市场在中国的场外延伸。其中不成型的国内做市商与海外黄金市场在中国的场外延伸，目前基本被定义为不受法律监管与保护的灰色市场。但总体来看，我国黄金市场类型还算基本全面。但各大市场却存在不少不太完善的地方，我认为有待于我们从完善的角度加以思考。而灰色黄金交易领域则有待于规范和发展新的市场予以补充。

首先让我们来看一看上海黄金交易所的情况。
目前上海黄金交易所推出的品种已比较齐全，且交易时段也非常方便地涵盖了欧美主要交易时段，这对投资人控制市场风险相当重要，这也是金交所交易品种的亮点之一。

但目前金交所客户资金管理模式似乎更适合以会员单位为主的机构投资参与。AU999与AU9999的品种主要体现为国内现货贸易。AU（T+D）为一方面现货贸易提供了套期保值途径，同时也适合机构和个人投资与投机。从交易量情况来看，09年1～9月，金交所黄金品种日成交量在18.2吨左右，其中AU(T+D)日均成交在11.2吨左右，占总交易量的61.5％。也就是说，金交所虽作为国内黄金现货贸易市场，但投资与投机性交易却在渐渐成为市场交易主流。这说明金交所在保持目前现货贸易的基础上，可以进一步考虑加强投资与投机性交易的硬件建设。

虽然目前金交所品种也对个人投资者实行了有条件开放，但尚未充分促进个人投资者的参与。其中主要原因是个人投资者的帐户资金管理存在不确定性的理论信用风险，目前个人参与金交所品种交易的资金是直接划转到会员机构或代理机构的公司帐户上，而没有实行类似证券、期货交易的独立资金托管。所以，一旦个人投资者所委托的交易经纪机构发生经营危机，则可能促使个人投资者遭遇信用风险。虽然目前国内尚未发生一例这样的信用纠纷，但如果发生，就会对这种资金托管模式下的交易信心形成较大打击，不利于市场发展与壮大。

我个人推荐三种解决方案：
一是交易所加强针对个人资金管理的交易与结算系统建设，在对会员单位的结算系统下建设针对个人结算的子系统。商业银行作为独立的第三方资金托管人。

二是在现有平台基础上，要求希望从事黄金经纪业务的会员单位与当地商业或地方银行建立合作，由银行作为独立的第三方客户资金托管人，每日实行无负债的资金结算。防止会员单位挪用客户资金形成信用风险。

第三，由于以商业银行为主的金融类会员单位自身具备很高的信用。如果在前两种方法无法实施的前提下，不妨考虑该项经纪业务重点由信用等级很高的商业银行来重点担纲。但由于目前交易所非金融类会员单位的经纪业务往往附加赠送咨询服务，对市场的培育及发展壮大更有促进。所以对于这三种建议，首推第一种，其次是第二种，再次是第三种。
（补充附注：在会议报告当天与上海黄金交易所顾问曾祥龙博士进行了更多沟通，目前关于客户资金信用风险问题已经得到彻底解决，多家商业银行已经或将进一步扩展个人投资者在上海黄金交易所的投资服务）

上海期货交易所期金
上海期交所期金目前仅仅是期交易所中的一个品种。09年1～9月日均成交21.2吨，与金交易所平分秋色。期交所期金在08年推出，但从08年期金推出前的07年来看，上海金交所日均成交约7.5吨，而09年日均成交出现了翻倍增长，可见黄金期货的推出并未影响金易所的交易壮大，故期交所与金交所并不是在抢一个固定大小的蛋糕，而是在相得益彰的共同发展中壮大，在共同的市场培养中壮大。从美国COMEX市场中期金09年1～8月成交量来看，日均成交12.244万手（尚未计算日均约合1.5万手的黄金期权交易量），约合380.8吨，进入9月消费旺季后的成交量增加更明显。期交所期金与金交所现货金交易日均总量，也仅仅只相当于COMEX期金市场的1/10交易份额，故两市都存容量成倍放大的市场发展潜力。金交所与期交所作为中国黄金市场的先驱，市场发展应该放眼于中国日渐崛起后的未来全球，而不单是国内的良性竞争。

目前期金市场吸引了一批新的黄金投资与投机者，这部分投资人部分来源于其它期货市场分流。期交所期金很好地解决了客户资金托管的信用风险问题，商业银行担纲着个人投资者的第三方托管单位。但交易模式上却存在一个较大缺陷，那就是缺少与欧美活跃交易时段的接轨，这使得投资人面临更大不确定性的市场驾驭风险。如果期交所期金能够解决与欧美主要交易时段的接轨问题，将存在更大发展空间。即期交所的投资人资金托管模式值得金交所借鉴，金交所覆盖的交易时段值得期交所借鉴。对于后期市场发展，无论是直接引进国际做市商还是开放国际期金市场，都是以做大别人市场为主，我们应该发展和完善自己的市场，做大自己的市场。

银行纸黄金
目前各大商业银行基本都推出了各自的纸黄金业务，并且不少银行实行24小时不间断交易。目前银行的纸黄金交易也是一种做市商交易，银行充当所有买家的卖家，充当所有卖家的买家。以国际现货金价为参照，不涉及保证金交易，风险相对较小。比较适合投资人进行波段或中线操作，也可作为投资人检验自己是否适合黄金衍生品交易的试验田。

既然银行纸黄金也是一种做市商交易，那么可能会对客户净头寸进行风险对冲。而目前银行对冲风险的国内市场只有上海金交所和上海期交所。所以银行纸黄金业务的进一步发展壮大也会促进金交所与期交所的交易壮大，这从商业银行近年的场内交易增量可以看出。

如果说银行纸黄金交易模式还需要什么补充，那应该是空头操作机制。如果银行纸黄金建立非保证金空头操作机制，将进一步刺激市场投机偏好，应该会对市场形成成倍促进作用。而其作为做市商的风险对冲需求也会促进金交所与期交所的场内交易壮大。而整个黄金市场交易量的扩大无疑增强了交易的流动性与有效性。具备空头机制的银行纸黄金交易将是投资人通往黄金衍生品市场的更好试验田。率先开展纸黄金空头交易机制的银行无疑将获得抢占市场的先机。

投资性金条
伴随黄金投资在中国的逐渐走俏，各种投资性金条也越来越多：主要有银行投资性金条，有金商投资性金条。但销售渠道、交易模式、与定价机制千差万别。有的投资性金条在银行销售，有的在商场与金商铺面销售。有的提供回购渠道，有的销售之后不再进行回购。此外，尽管各种合格的投资性金条品质一样，但交易定价差别很大。很多对黄金市场还不太明白的投资人对此还没有太多觉察，认为黄金都一样，不知道黄金买卖也可以货比三家。此外，我认为目前中国投资性金条的买卖价差总体偏大，这对投资人而言不太公平。有的投资性金条每克买卖成本超过10元，这增加了投资人获利难度，也不利于投资性金条的市场培养与壮大。这种情况的出现可能主要在于企业将自己的市场操作风险充分向投资人转移，或者在谋求市场混沌时的短期暴利。

目前投资性金条零售市场应该是 “乱市”出英雄，“乱市”树品牌的阶段。企业应该尽可能自己把握原材料采购，以及原材料保值的市场操作风险，降低投资人交易成本。把投资性金条的零售市场做出品牌，通过薄利多销做大，而不是简单追求利润率做强。比如我有100家门店，每家年盈利300万，年总计就是3亿盈利。而如果我总计10家门店，每家年盈利800万，利润也只有8000万。所以，对目前投资性金条的零售市场，我认为企业应该将做大、做品牌占领市场放在首位，而不是简单追求市场混沌中的零售暴利。黄金是最同质化的金融商品，当市场逐渐成熟后，投资人知道该怎样进行理性选择。可能有的企业会忧虑资金周转，但银行应该非常乐意接受黄金抵押贷款。故与银行建立灵活的黄金抵押合作应该能够解决企业资金流动问题。

纪念性金条
目前投资人更难从纪念性金条中获得具备收藏价值的投资溢价。此外，纪念性金条的民间市场很不发达，纪念性金条的流动往往只在销售商与投资人之间，难以见到在投资人与投资人之间流动。销售商对投资型金条的回购也仅当黄金原材料回购，根本无从体现纪念性金条的收藏概念溢价，或者说销售商也不认可其存在的收藏溢价。纪念性金条应该由国家法定造币单位，或国家针对某历史题材指定单位生产。

纪念性金条应该存在纪念性题材的投资溢价，但目前最主要问题是缺少纪念性金条、金币的自由流通市场。纪念性金条、金币的发行单位不妨可以考虑在该领域市场建设上多下功夫。

不成型的国内做市商、海外黄金市场在中国的场外延伸
这个市场是我认为最需要理顺，以及加强发展。目前国内做市商模式主要由银行纸黄金和一般金商的做市商模式组成。前面我已经讲过银行纸黄金是做市商模式，可时时进行回购的投资性金条交易也是一种做市商模式，但不涉及保证金。

此外，部分国内金商建立的涉及杠杆比例不等的保证金交易模式，以及部分海外市场在中国通过网络交易的场外延伸，因其在国内不受法律保护和不受相关机构监管，被俗称为灰色市场。但就是这个所谓的灰色市场，多年来一直魅力不减。本公司每天都会接到不少投资人电话，希望我们为其推荐场外保证金交易平台。当然，我们不会做推荐。目前这个平台的优缺点是这样的：

从缺点来看：目前这种场外保证金做市商模式面临的最大缺点是法律监管空白的信用风险。就国内这种场外做市商模式而言，面临的信用风险主要有做市商资本金普遍达不到金融做市商应该具备的标准，做市商自身的混业经营业容易对做市商业务产生较大影响，即国内由部分金商自发形成的做市商，其抗意外的风险能力较差，这会对参与该平台交易的投资人带来较大信用风险。就国外黄金市场在中国的场外延伸而言，最主要的信用风险在于出现纠纷时缺乏法律保护，中国法律可能鞭长莫及。此外，过多的中间环节也增加了投资人面临的信用风险。

从优点来看：这种场外做市商模式交易灵活，交易有效性高，是对场内交易的必要补充。其灵活的交易模式主要体现在几乎24小时不间断的交易便捷上。

对于这种非常受投资人欢迎的交易模式，这几年国家一直采用“堵”的形式予以打击抵制，而不是积极地建立相应平台予以输导。但国家对这种场外的灰色交易并未达到彻底根除目，据我所知，在05～08年间，所有涉及黄金业务的企业中，至少90％的企业都有通往海外的黄金交易渠道。我国场外的灰色黄金交易量远远大于场内交易。而就是今天，我国场外黄金的灰色交易量可能也不会比期交所与金交所交易总量少。

可见我们应该建立这样一个市场来迎合黄金市场进一步发展的需求，而不是简单地“堵”。中国的黄金市场要彻底达到国际化，想要具备黄金交易的定价权，这个市场的建立显得不可或缺。

在建立这个市场的过程中，缺点非常容易控制。商业银行应该是最佳选择，雄厚的资本金与信用保证是该平台建立的必要条件。此外，现在的上海黄金交易所也可以谋求与商业银行的共同合作来建立这个市场。08年2月，民生银行曾推出30倍杠杆的黄金保证金场外交易模式，得到了投资人积极响应，但在同年6月被央行叫停，9月测底清盘。对此，站在中国黄金市场发展的角度上看，本人确实不太理解。希望管理层的准备工作不要落后于市场的发展需求。

那么场外市场的发展会影响上海期交所与上海金交所黄金交易的壮大吗？答案是否定的。在前面我已经讲过，目前上海期金与上海现货金日交易总量仅约美国场内黄金日交易量的1/10，可见这个市场的蛋糕还可以做得很大。此外，如果国内的黄金市场得以充分发展，不仅能使国内黄金投资队伍进一步壮大，也能吸引更多国际投资进入中国黄金市场进行交易。国际上很多黄金做市商，它们同时也是黄金场内交易的会员单位，它们可以将场外的风险头寸在场内进行对冲，这也有助于场内交易的放大。所以在我看来，黄金场内与场外市场的发展不是你死我活的生存竞争，而是共同发展的多赢格局。此外，我个人觉得，在进一步丰富与发展黄金市场的道路上，与其引入国际期金或国外做市商，还不如充分发展和完善我们自己的市场后与国际接轨，这有利于提高中国的金融地位。

我今天的发言就进行到这里。由于本人一直工作在黄金投资的前沿，对一些市场现象和市场状况的了解要多于对市场发展的思考。所以如果观点上存在与部分来宾的利益或观点冲突，希望谅解。我个人更愿意和大家多做行情上的交流。

Status Quo & Development Suggestions for China's Gold Market

 Yang Yijun, Chief analyst of Wellxin Investment Consultation Company Limited, October 2009

Ladies and Gentlemen, I am very delightful today to discuss about the development prospect of both gold sector and gold market. Since my job is closely connected with the gold trading market, I’d like to share some ideas with you about the present conditions of domestic gold market, in the hope that my suggestions could contribute to the development of China’s gold market.

Current composition of China's gold market
China's gold market is currently composed of the following major markets: Shanghai Gold Exchange, Shanghai Futures Exchange, paper gold of banks, investment gold bars of gold merchants, various kinds of commemorative gold bars, unshaped domestic market makers, OTC transaction of overseas gold markets in China. Of which, the unshaped domestic market maker together with the OTC transaction of overseas gold markets in China are currently defined as gray market, which are neither regulated nor protected by legislations. Generally speaking, a complete variety of gold markets are available domestically. However, the above-mentioned markets are yet not perfect to a certain extent, which need to be improved further. Meanwhile, the gray gold market is required to be regulated and supplemented by the introduction of a new market.

Firstly, Lets have a look at the present conditions of Shanghai Gold Exchange
At the present, the gold investment vehicle of almost all varieties have been introduced in Shanghai Gold Exchange, with its trading hours basically in line with that in Europe and America, this is critically important for investors to control market risks and also one of the highlights for the gold exchange.

However, the client funds management mode currently adopted by the gold exchange seems more suitable for institutional investors principally represented by corporate members. AU999 and AU9999 gold transactions are mainly conducted in domestic spot market. AU(T+D) transaction provides hedging for spot market on the one hand, and serves as a platform appropriate for institutional & individual investment and speculation on the other. From the perspective of trading volume, the first nine months of 2009 witnessed gold products reaching approximate 18.2tpd on the gold exchange, of which AU(T+D) transaction was about 11.2tpd on average, representing 61.5% of the total trading volume. In other words, although the gold exchange is recognized as a domestic gold spot market, it has been increasingly preoccupied by the investment and speculation-oriented gold trade. Therefore, on the basis of maintaining the current spot trade, the hardware construction dedicated to investment and speculation-related transactions should deserve more attention from the gold exchange.

Though individual investors are allowed conditional access to gold products on the exchange, proactive approaches to fully individual participation are still far from enough, mainly attributing to the theoretical credit risks involved with individual investor's account management. Currently, individual funds earmarked for gold products transaction are directly transferred to the accounts of corporate investor members or agency institutions, rather than the separately managed funds trust similar to securities and futures trade. Accordingly, if brokerage firms entrusted by individual investors are hit by operating crisis, the individual investor concerned will likely be left stranded in credit risks. No domestic credit dispute has emerged up to now, but if one single case occurs, the market confidence in such funds trust mode will be crashed, thus exerting negative impact upon the healthy growth of gold market.

I personally recommend three solutions:

Firstly, the trading & settlement system dedicated to individual funds management should be improved by the gold exchange, and a subsystem specifically targeted on individual settlement should be set up under the settlement system of corporate investor members. Commercial banks act as an independent third-party funds custodian.

Secondly, based on the existing platform, corporate investor members interested in gold brokerage business are required to establish cooperative relations with local commercial banks or local banks. As an independent third-party client funds custodian, the bank shall carry out non-indebted funds settlement on a daily basis, so as to guard against credit risks arising from misappropriation of client funds by corporate investor members.

Thirdly, given that financial corporate investor members, mainly commercial banks, generally enjoy favorable credit standing, it is suggested that commercial banks with higher credit rating engage in gold brokerage business, if the above-mentioned two approaches fail to be applied. Nevertheless, apart from the brokerage business, relevant advisory service is always rendered by non-financial corporate investor members on the exchange currently, which could better facilitate a healthy development of such market. Therefore, I recommend the first solution first, then the second and the third solution last.

Gold futures on Shanghai Futures Exchange
Gold futures is just one of the tradable products on Shanghai Futures Exchange. The first nine months of 2009 saw its trading volume reaching 21.2tpd on average, ending in a tie with Shanghai Gold Exchange. The year of 2007 witnessed an average of 7.5tpd in terms of trading volume on Shanghai Gold Exchange before the debut of gold futures in 2008 and its daily turnover doubled in 2009, demonstrating that the growth of gold exchange is not discouraged by the introduction of gold futures. Therefore, the gold futures exchange and gold exchange are not scrambling for a fixed cake, instead they are developing harmoniously hand-in-hand in a common market. The first eight months this year saw a daily average of 122,440 hands on COMEX, equivalent to 380.8 tones, excluding the daily average of 15,000 hands for gold futures option. The turnover in the peak season of September also increased sharply. However, the combined total of gold futures and spot gold daily traded both on China’s futures exchange and gold exchange accounts for merely one tenth of COMEX gold futures market, so the two domestic exchanges still boast great development potentialities. Along with China's robust economic growth, Shanghai Gold Exchange and Shanghai Futures Exchange, as the spearhead of domestic gold market, should commit themselves to the international market, rather than narrowed down to domestic competitions.

At the present, some new investors and speculators, partly diverted from other futures market, have been attracted into the gold futures market. The gold futures on Shanghai Futures Exchange has successively addressed the problem of credit risks relating to client funds trust, specifically speaking, commercial banks act as the third-party funds custodian for individual investors. However, there exists a relatively serious defect in the trading mode, that is, the trading hours of gold futures cannot keep pace with that prevalent in Europe and America, which makes investors more susceptible to greater uncertainty risks in market control. If this problem is solved, the gold futures on Shanghai Futures Exchange will enjoy much greater development potential. In conclusion, the gold exchange should learn from the futures exchange about investor's funds trust mode, while the futures exchange should learn from the gold exchange about trading hours. As far as the later-stage market development is concerned, whether it be a direct introduction of international market maker or opening up international gold futures market, it is mainly designed to strengthen the development of foreign markets. We, however, should concentrate efforts on the growth and improvement of our own market.

Paper gold of banks
The paper gold has been introduced almost by all the commercial banks, with 24-hour continuous service rendered nowadays. As a market maker of paper gold, the bank acts as a seller for all the buyers on the one side, and serves as a buyer for all the sellers on the other. With the international spot gold price taken as reference, the paper gold has nothing to do with margin trading, so the risk involved is relatively small. Therefore, the paper gold is more suitable for investors to operate by period or over medium term, based on which the investor can also check whether or not he is capable to handle gold derivatives.

Since the paper gold is also classified as a market-making trade, risks hedging might be applied to client's net position. Currently, only Shanghai Gold Exchange and Shanghai Futures Exchange can provide banks with platform for risks hedging in China, therefore the robust growth of paper gold is well positioned to catalyze further development of Shanghai Gold Exchange and Shanghai Futures Exchange, as evidenced by the increased on-exchange turnover of commercial banks over recent years.

If any supplement is necessitated for the trading mode of paper gold, that will be bear operation mechanism. The non-margin bear operation mechanism of paper gold, once established, is supposed to further stimulate market speculation preference, thus accelerating market growth by multiple times. Meanwhile, the risk hedging needed by banks as market makers is set to facilitate the on-exchange trade both on the gold exchange and futures exchange as well. As a result, the trading liquidity and validity will undoubtedly be improved attributing to the increased turnover in the gold market as a whole. The paper gold with bear mechanism is regarded as the best investment vehicle for investors when they tap gold derivatives market. The bank that spearheads paper gold bear operation mechanism will take the lead in grasping growth opportunities.

Investment gold bars
All kinds of investment gold bars have increasingly emerged along with the gradually heated gold investment in China, mainly including the investment gold bars either from banks or gold merchants. Investment gold bars differ from each other in terms of marketing channels, trading mode and pricing mechanism, e.g. some gold bars are sold in banks, shopping malls or gold merchants’ shops, some can be repurchased after sales, but some not. Additionally, various investment gold bars are priced differently in spite of the same quality, of which many green-hand investors are yet unaware in the gold market, since they simply believe that the gold bar of various kinds are identical to each other, not realizing that the gold price can be variable in different shops. Generally speaking, the bid-ask spread for domestic investment gold bars is relatively large, which is unfair for investors. Investors have found squeeze on profit margins increasingly difficult because the transaction cost of some investment gold bars has exceeded RMB10 yuan/g, as a result of which the further market growth of investment gold bars has been discouraged to some extent. Reasons behind such phenomenon lie in the fact that companies have passed on their market operation risks completely to investors, or they are merely striving for immediate huge profit amidst the market turbulence.

Against the background of unfavorable retail market for investment gold bars, it is wise of companies to build up their own famous brands, that is, tougher companies for tougher times. The companies themselves should rein in risks involved with raw materials purchasing and hedging, in an effort to reduce investor’s transaction cost. Meanwhile, they should blaze a trail with brand consciousness in the retail market of investment gold bars by expanding operation scale based on small profits and quick returns, rather than blindlessly striving for higher profit margins. For example, if I opened 100 shops, with each earning RMB 3 million yuan, then the combined profit totals RMB300 million yuan annually. In contrast, if I just opened 10 shops, with each making a profit of RMB 8 million yuan, then the combined profit reaches only RMB 80 million yuan. Personally speaking, I recommend companies put the domination of market on top of priority list by expanding sales volume and building up famous brands, rather than taking advantage of market chaos to pursue after windfall profit. Given that the gold is identified as a homogeneous financial commodity, investors are capable to make rational choices after the market is fully developed. Concerns might be possibly mounting about capital turnover, nevertheless, it is highly likely that the bank would embrace gold-secured loans quite willingly, therefore the cash flow headache inflicted on companies could possibly be alleviated through flexible gold-secured corporation with banks.             

Commemorative gold bars
Nowadays, investors find it increasingly difficult to acquire investment premium with collection value from commemorative gold bars. Additionally, the non-governmental market for commemorative gold bars is very immature, as evidenced by the fact that commemorative gold bars are usually traded between distributors and investors, whereas seldom seen among investors. The investment gold bar is repurchased by distributors merely as gold metal, with the collection premium of commemorative gold bars not reflected at all, that is to say, the collection premium has not yet been acknowledged by distributors. The commemorative gold bar is required to be produced by national legitimate mints or companies specifically designated by China’s government in memory of certain historical events.         

There should exist investment premium for commemorative gold bars in memory of certain subjects, however, a free market is currently absent for commemorative gold bars and gold coins. It is therefore recommended that the issuer of commemorative gold bars and gold coins should focus attention on development of such a free market. 

Unshaped domestic market maker & OTC transaction of overseas gold market in China

Regulation and development of this market are most required from my point of view. The present market-making mode in China mainly finds its expression in the paper gold and ordinary gold merchants. I have previously mentioned that the paper gold fell under the category of market-making mode, so does the investment gold bar that can be repurchased at times, but with margin not involved. 

In addition, the margin trading mode with variable leverage ratios adopted by some domestic gold merchants, together with OTC transactions of some particular overseas markets by way of on-line trading in China are commonly known as gray market, since they are neither protected by Chinese legislations nor regulated by supervisory authorities concerned. However, it is just this so-called gray market that remained attractive for years. My company receives many calls from investors every day inquiring about OTC margin trading platform, which, of course, we don’t recommend to them. The advantages and disadvantages of such platform are listed as follows:

In respect of disadvantages, the biggest disadvantage of OTC margin trading mode is the credit risk resulting from absent legislative supervision. As far as the OTC market making mode in China is concerned, the credit risk mainly lies in the following facts: firstly, the domestic market maker generally cannot reach the threshold of capital fund as necessarily required for financial market makers; Secondly, the market-making trade can be easily influenced by the mixed operation of market maker itself, that is, the market makers spontaneously formed by domestic gold merchants are not very capable to withstand unexpected risks, so investors engaged in such platform will be vulnerable to relatively greater credit risks. When it comes to OTC transactions of overseas gold market in China, the major credit risk lies in that no legal protection is available in case of disputes, because Chinese legislation is possibly invalid. Additionally, too many intermediate links also have investor exposed to greater credit risks.         

In respect of advantages, as a necessary supplement to on-exchange transactions, the OTC market making mode is flexible and more effective, with 24-hour continuous service rendered conveniently and flexibly.

Investors have found this kind of trading mode particularly appealing, however, China’s government has been blocking up the waves and tides of it over recent years, rather than providing regulation and guidance through active establishment of relevant platforms. To my knowledge, the OTC gray market is not rooted out despite governmental efforts, and at least 90% of companies involved in gold trade have access to overseas gold trade between 2005 and 2008. The OTC gold trading volume in gray market outnumbers on-exchange trade in China to a substantially greater extent, and the gray market today also possibly doesn’t compare unfavorably with Shanghai Futures Exchange and Shanghai Gold Exchange combined in terms of gold trading volume. 

Such a market is therefore necessitated to satisfy the further growth demand of gold market, rather than simply blocking it up. Establishment of such a market seems inevitable if China’s gold market is to be fully internationalized with gold pricing power.     

The disadvantage can be easily controlled if such a market is established. Commercial banks are the best solution, whose sufficient capital fund and credit guarantee are essential prerequisites for the establishment of such platform. In addition, Shanghai Gold Exchange can cooperate with commercial banks to set up such a market. The OTC gold margin trading mode with 30 times leverage ratio was once introduced by China Minsheng Banking Corp., Ltd. last February, though much appealing to investors, it was given red light by the Bank of China in June and completely liquidated in September the same year. I personally cannot understand it from the perspective of China’s gold market advancement, hoping that relevant administrative authorities could not lag far behind requirements of market development. 

Here comes a question: could the gold trade on Shanghai Futures Exchange and Shanghai Gold Exchange be discouraged by OTC market growth? Of course not. I have previously mentioned that the daily trading volume of Shanghai gold futures and Shanghai spot gold combined merely accounts for approximate one tenth of daily on-exchange trading volume in America, suggesting that the gold market cake can be likely made even larger. Moreover, if China’s gold market is fully developed, an increasing number of domestic gold investors will emerge from the surface, with massive inflow of more foreign investment funds into domestic gold market as well. Many international gold market makers are also corporate investor members registered in gold exchanges, who can hedge their OTC risk position by way of on-exchange transactions, thus facilitating the development of on-exchange transactions as well. In my view, the on-exchange gold market and OTC market are not entangled in a cut-throat competition struggling for survival, instead they are developing together on the basis of mutual benefits. Moreover, compared with the introduction of international gold futures and foreign market maker to further improve China’s gold market, it is suggested that the domestic gold market should be perfected and fully developed so as to become integrated in the global market, which will help upgrade China’s financial status as a result.       

My speech is ended here today. Considering that I have been long devoted to the frontier of gold investment sector, with more focus placed on market phenomena and conditions than market development, therefore I would appreciate your kind understanding if my ideas conflict with your interests and opinions. I do hope to communicate with you on gold trading market.   

Wellxin Investment Consultation Company Limited
Tel. for consultation: 028-86128733；028-66719233
Website: www.wellxin.com

  
Yang Yijun
Chief analyst of Wellxin Investment Consultation Company Limited in Chengdu City, Sichuan Province, China
Mr. Yang has delivered many lectures on gold investment separately sponsored by China Merchants Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, gold merchants, TV stations, newspaper offices, etc. Mr. Yang is also a special contributor for Securities Times, China Securities Journal, Shanghai Securities Journal, International Finance New, China Precious Metals, South Daily, Financial Investment and Chinese Business News. Additionally, as China’s senior contributing author on gold trade sector, Mr. Yang has had many articles released in China Business, Beijing Daily, Beijing Evening News, Beijing Youth Daily, First Financial Daily, Liaoshen Evening News, Yangcheng Evening News, Shenzhen Business, Sina website, Sohu website, Netease website, People’s Daily Online, China Gold Association website, China Gold website and hundreds of domestic media press.

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