News Column

China : ICBC s RMB Gold Forward Helps Enterprises Hedge Against Risks

August 14, 2014

Recently, a gold manufacturer in Fujian has applied to ICBC for RMB gold forward business, which successfully realized hedging for about RMB 10 million of gold and effectively avoided market risks from exchange rate and gold price movements.

In early 2014, ICBC introduced RMB gold forward as an innovative derivatives service. After customers enter into forward gold trading contracts quoted in RMB with ICBC, agreeing upon the quantity and price of future gold purchase or sale, customers can, upon the maturity of such contracts, launch reverse transactions at the spot price of RMB gold and settle the balance of RMB fund. Compared with gold forward settled in USD in the past, this new service not only helps enterprises lock gold cost and avoid the risk of potential gold price movements, but also enables them to hedge against the exchange rate risk of RMB/USD in gold forward trading, better meeting corporate requirements for gold hedging.

As China s gold industry steadily develops in recent years, the manufacturing and processing capacity and consumption of gold have continued to pick up. However, due to the impact of international economic, political and other factors, gold has significant volatility, exposing gold manufacturers and users to great market risks. Companies also face exchange rate movement risk as international gold transactions are mostly denominated in USD, In this context, ICBC s RMB gold forward has successfully linked the two different markets of gold commodity transactions and forward foreign exchange settlement and sale business, making transactions direct and convenient for domestic enterprises which are used to settling in RMB. This service is therefore capable of better satisfying risk hedging requirements of gold manufacturers and users.

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Source: TendersInfo (India)

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