MW How China could claim a much bigger slice of the world's gold-trading business

By Myra P. Saefong

China's Shanghai Gold Exchange still remains very much domestic in nature

Gold futures tallied their 37th record close of the year on Tuesday.

China reportedly has plans to invite some countries to buy physical gold and store it within its borders, in the country's latest move to expand its reach into the international market for the precious metal.

When it comes to gold, China is the world's biggest miner, a net importer, a large central-bank buyer and a key consumer nation - but it "lacks any kind of bullion banking market, and trading through the Shanghai Gold Exchange remains very much domestic," said Adrian Ash, director of research at BullionVault. China's central bank, he noted, is "keen to change all this."

The People's Bank of China $(PBC)$ plans to become a custodian of foreign sovereign gold reserves by using the Shanghai Gold Exchange to court central banks in "friendly" countries to buy bullion and store it within the nation's borders, Bloomberg reported Tuesday, citing people familiar with the matter. MarketWatch sent an after-hours request by email Tuesday for comment on the report to the gold exchange in Shanghai.

"Building stockpiles of gold ready for leasing and loans" would be a key step to establishing a bullion banking market, Ash said in Tuesday commentary. However, another key step would be to ease the restrictions on exporting bullion out of China, "so as to keep domestic prices more closely in line with global [price] quotes."

Gold trading through the Shanghai Gold Exchange remains very much a domestic practice, noted Adrian Ash of BullionVault.

The final step would be to require that the Chinese yuan (USDCNY) become "freely convertible - something there's no sign of yet," he added.

Foreign investors also would first have to get past their misgivings about storing their gold outside of their own nations' borders, particularly when it comes to communist China.

Foreign investors and governments considering where to hold a portion of their bullion will "need to trust the rule of law and respect for property rights in the way that London and New York have always enjoyed," Ash said. "That looks like a big ask starting from where the communist state stands today."

The World Gold Council considers London's bullion market, the U.S. futures market and the Shanghai Gold Exchange to be the three most important gold-trading centers in the world. London operates the world's largest over-the-counter market, where traders transact directly with each other, rather than through an exchange.

London's bullion market, the U.S. futures market and the Shanghai Gold Exchange are the three most important gold-trading centers in the world, according to the World Gold Council.

Still, the report that China is "seeking to act as custodian of foreign sovereign gold reserves underscores Beijing's ambition to expand its influence in the bullion market and reduce reliance on Western financial hubs," said Felipe Barragán, expert research strategist at Pepperstone. "Combined with the PBoC's steady purchases, the initiative highlights the importance of central-bank demand as a long-term pillar of support."

The report that China is 'seeking to act as custodian of foreign sovereign gold reserves underscore Beijing's ambition to expand its influence in the bullion market and reduce reliance on Western financial hubs.'Felipe Barragán, Pepperstone

The Bloomberg report comes just months after the PBC called on the Shanghai Gold Exchange to expand and explore the internationalization of its gold contracts as part of a new "action plan" for facilitating cross-border financial services in Shanghai, said Ash.

In June, the Shanghai Gold Exchange also launched its first offshore gold delivery vault in Hong Kong and listed relevant gold contracts for delivery there.

Meanwhile, the PBC announced its ninth consecutive monthly gold purchase in July, according to the World Gold Council. The central bank bought 2 metric tons of gold that month and its official gold holdings have reached 2,300 metric tons. Year to date, China has raised its gold holdings by 21 metric tons, according to the World Gold Council.

Futures prices for gold on Tuesday tallied their 37th record-high close of the year so far, with the December contract (GCZ25) (GC00) at $3,815.70 an ounce on Comex.

Read: Gold hit another record high. Has it formed a bubble yet?

-Myra P. Saefong

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September 23, 2025 17:06 ET (21:06 GMT)

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