Polymetal: direct access to the Shanghai Gold Exchange is still limited

15/11/2023

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Direct access to the Shanghai Gold Exchange remains limited for foreign companies. This is stated in the response of the gold mining company Polymetal, registered in the AIFC, to a request from an inbusiness.kz correspondent .

“The generally accepted global price benchmark for gold is still the LBMA price (London Bullion Market Association – London Bullion Market Association – Note) . At the same time, direct access to the Shanghai Exchange for foreign companies is limited and associated with significant difficulties. Polymetal is guided precisely for the London fixing due to its availability, the company’s membership on the exchange, and the fact that the National Bank of Kazakhstan and other key counterparties use it in their contracts. The National Bank has the priority right to purchase refined gold in Kazakhstan. Polymetal does not export metal bypassing priority right of the National Bank,” a representative of the gold mining company wrote in an email.

At the beginning of November, our publication wrote that Chinese banks had stopped participating in gold pricing in London. The withdrawal of Chinese banks from LBMA price auctions in the gold market has raised questions about the impact on trading liquidity and their determination of prices for the precious metal, as they no longer reflect the supply and demand for gold from China, which is its largest producer, importer and consumer. .

“Perhaps the absence of Chinese banks from London auctions is one of the reasons why the Shanghai Gold Exchange premium has deviated so much above the LBMA gold price recently,” the publication noted.

In 2016, the Kazakh delegation from the AIFC, led by Kairat Kelimbetov, visited the Shanghai Gold Exchange. Then, issues of cooperation in the gold market within the framework of the “One Belt, One Road” project were discussed with the Chinese side. Currently, the AIFC does not have any common projects with the Shanghai Gold Exchange.

Let us recall that in September, gold mining enterprises in Kazakhstan, through their association, asked to liberalize the export of gold so that they could export it abroad independently.

“The Dragmet Association appealed to the National Bank of the Republic of Kazakhstan with a request to consider the possibility of waiving the right of pre-emption to purchase refined gold produced in some cases and providing subsoil users with permission to export refined gold for sale to foreign buyers. Today, the National Bank is studying ways to resolve this issue,” – our publication reported.

The National Bank has not yet made any decision on Dragmet’s proposal, according to its response to a request from inbusiness.kz via the e-otinish platform.

“Concerning the issue of liberalizing the export of refined gold through the practice of partial implementation of the state’s priority right to replenish assets in precious metals, we inform you that the issue requires careful analysis taking into account the goals and objectives of the monetary policy of the National Bank of the Republic of Kazakhstan. Based on the results of studying the issue, this proposal will be submitted for discussion with participants in the precious metals market on the site of the ALE “Republican Association of Precious Metals Producers,” the letter states.

In June, the Altynalmas company proposed to abandon the National Bank’s priority purchases of gold mined and refined in Kazakhstan, due to the fact that “on average, the gold mining industry loses more than $8 million per month due to the difference between the best spot price for gold on London Stock Exchange and the cost of purchasing gold by the National Bank according to the current formula (quotation period is a month),” wrote Kursiv.

The National Bank explains that “in accordance with paragraph 18 of the rules, the price of refined gold is determined in tenge based on the official exchange rate of the tenge to the US dollar on the date of the transaction and the average value of the morning and evening fixing (price quotes) for gold of the London Bullion Market Association market association), averaged over the entire month of delivery and discount.”

Source and Credit: inbusiness.kz

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