China moved to liberalize its Gold market thus increasing the number of banks allowed to trade Gold Bullion internationally and announcing measures that will encourage development of Gold-linked investment products.

The move by Beijing’s central bank comes as the country’s investors deploy huge amounts of money into Gold a trend that is becoming a significant factor for global Gold prices.

Last year, Chinese investors bought 73 tonnes of Gold Bullion, up from 18 tonnes in Y 2007. The new policies are likely to increase liquidity in the domestic Gold market and drive the development of Gold financial products, analysts said.

China is the world’s largest Gold producer and the 2nd largest consumer, after India, but its domestic market hampered by limited investment products.

Gold prices rose in London on signs of robust buying from India’s jewellery sector.

Spot gold traded at US$1,190 oz, up from a 3 month low of less than US$1,160 oz last week.

GFMS, the London-based precious metals consultancy, said that Chinese investors, who are building wealth at an unprecedented rate, were diversifying their assets into Gold to “protect themselves against inflation”.

The People’s Bank of China said “the need to perfect foreign exchange policies in the Gold market is clear.”

It called for better financing services for Gold Bullion, opening the door for Chinese banks to hedge their Gold risk overseas.

The central bank also hinted at changes in taxes on Gold Bullion. But it failed to endorse gold as an investment and to suggest it planned to increase the size of its bullion reserves, one of the world’s largest.

The new gold guidelines are part of the gradual internationalization of the Chinese banking system. Restrictions on some RMB denominated investment products in Hong Kong have been lifted, and Renminbi cross-border settlement programs have been expanded this year.—Paul A. Ebeling, Jnr. www.livetradingnews.com

Posted by Shayne Heffernan on Aug 4th, 2010and filed underBRIC, Equities, Latest News, Markets.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site