Daily Gold Market Report

LME to Integrate ShFE Prices in New Contracts
New Era in Global Metals Market Dynamics

(USAGOLD – 12/19/2023) Gold prices remained muted on Tuesday, with a minor increase in the dollar offsetting support from declining Treasury yields. Investors are anticipating U.S. economic data expected later this week, which could provide more clarity on the Federal Reserve’s approach to interest rates. Gold is trading at $2021.69, up $2.07 cents. Silver is trading at $23.86, flat on the day. The London Metal Exchange (LME) is set to introduce new metals contracts that will use pricing from the Shanghai Futures Exchange (ShFE), Reuters reports. This is a move that marks a significant shift in global metals markets and highlights China’s increasing influence. This initiative, termed cross-listing, involves LME metal contracts being settled against ShFE prices. This development follows a strategic change in Chinese exchanges, driven by government pressure to innovate and extend their global influence, particularly in controlling commodity prices. While the specific metals involved are not specified, copper and aluminium are likely candidates due to their high trading volume on both exchanges. The process will allow easier access to Chinese market prices for LME members but raises concerns about dependency on Chinese regulatory practices and the risks of potential future policy changes by ShFE. The success of these new contracts will depend on their ability to attract sufficient trading volume and liquidity, noting that many recent LME contract launches have struggled to achieve traction.