Chinese Bank To Become Part Of Silver Price-Setting Mechanism

A Chinese bank will soon join the London Bullion Market Associations (LBMA) silver price-setting process.

According to a Reuters report, China Construction Bank signed a memorandum of understanding with CME Group (CME). It will join HSBC, JPMorgan Chase (JPM), Mitsui & Co Precious Metals, Bank of Nova Scotia – ScotiaMocatta, Toronto Dominion Bank (TD), and UBS in taking part in the daily auction process hosted by CME and Thomson Reuters.

CME and Thomson Reuters took over operation of the London silver price benchmark last year, after auctions replaced historic precious metals “fixes.”

According to the LMBA website, the London Silver Fix has served as a global benchmark for 117 years.

This is yet another sign of China’s expanding influence in precious metals markets. Over the summer, Bank of China became the first Chinese bank to join the auction process that sets gold prices in the London market, and China will reportedly create a yuan-denominated physical gold price setting mechanism through the Shanghai Gold Exchange (SGE) by the end of this year. According to a Reuters report, the plan aims to give China more influence over gold pricing. The country already leads the world in production and consumption of gold bullion.

Meanwhile, the Asian nation continues to expand its holdings of physical gold at a steady pace, increasing its stash another 1% in September.

China currently ranks as the world’s largest consumer and producer of silver, according to Reuters.

While the inclusion of a Chinese bank in the silver price setting mechanism won’t likely have a dramatic effect on the price of silver in and of itself, it does represent shifting global paradigm. Eastern markets continue to play an increasingly important role in global finance, and the Chinese are steadily positioning themselves to become essential to the international gold and silver trade.