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ISSUE 95 October 2019 The Bank’s International Golden A PRICE Development Evolution BENCHMARK of the SGE Interview with the FOR THE AGES By Wang Zhenying - page 11 Bank of England - page 4 By Rachel Harvey - page 21 SAVE THE DATE! Global Precious Metals Conference 2020 11-13 OCTOBER EPIC SANA Lisboa Hotel, [email protected] Lisbon, Portugal www.lbma.org.uk/events ALCHEMIST ISSUE 95 EDITORIAL ISSUE BY THOMAS KENDALL, CHAIR OF LBMA’S PUBLIC AFFAIRS COMMITTEE AND HEAD OF PRECIOUS METALS SALES, ICBC STANDARD BANK PLC HIGHLIGHTS The Bank’s Golden Evolution - A Q&A Session The basic The programme will be kick-started by a With Victoria Cleland and keynote speech from James Kynge, Emerging Ruth Crowell, page 4 numbers are Markets Editor for the Financial Times. 100 Years of the Gold Price - Part Four impressive James is one of the most-experienced Western By Dr. Michele Blagg and journalists covering Asian affairs, having spent when it comes Fergal O’Connor, page 8 over two decades in the region for Reuters and, to China and since 1998, for the FT. He’s exceptionally well The International Development gold: $90+ placed to put the current macroeconomic and of the Shanghai Gold Exchange geopolitical forces into context. By Wang Zhenying, page 11 billion in official reserves; The session focusing on innovation in the Jeremy East: Shining a Light on Asia 400+ tonnes in mine Chinese gold market will cover developments Interview with Aelred Connelly, page 14 production; 15+ million on the exchanges, in the jewellery market, in clearing and vaulting, and in both retail A Price Benchmark for the Ages ounces traded onshore and investor products. The speakers are all By Rachel M. Harvey, page 21 leading figures from the Chinese gold sector, daily. There is no bigger representing the Shanghai Gold Exchange, SBMA’s Silver Jubilee & Beyond market and no market Chow Tai Fook, Industrial and Commercial By Albert Cheng, page 26 Bank of China, Ping An Bank and Bosera Centenary of the Gold Price Reception that has evolved as rapidly Asset Management. By Aelred Connelly, page 30 over the past 15 years. Key trends in the platinum group metals will be addressed in the afternoon session, with Facing Facts Innovation is continuing at pace at both the By Federico Gay, page 32 the speakers delivering first-hand insights into macro and micro level, and so it is appropriate trends in PGM use in automobile catalysts that the 20th LBMA/LPPM Conference is Regulation Update (Chery Automobile Co), the fibreglass sector returning to China. By Rachel Hart, page 35 (Owens Corning) and how platinum jewellery The location of INNOVATION IS fabricators are responding to market Front cover – Victoria Cleland and Ruth Crowell Shenzhen is also challenges (Shenzhen Long Jia Jewellery in the gold vaults at the Bank of England. apposite. It is both CONTINUING AT Industry Co.). A longer-term perspective a microcosm of PACE AT BOTH THE will be provided by Anglo American China’s economic MACRO AND MICRO Platinum with the latest thoughts on We have also put together an eminent price development and LEVEL AND SO IT how the developing hydrogen economy forecasting panel, comprising experts from the heart of the IS APPROPRIATE will affect platinum demand. the Bank of China, Norilsk Nickel, Standard country’s gold and TH Chartered and Kingold Financial Services. THAT THE 20 This year, we have two very strong platinum jewellery Philip Klapwijk has stepped forward to take on keynote presentations to start the manufacturing sector. LBMA/LPPM the unenviable task of teasing out some key CONFERENCE second day. The Central Bank of the takeaways from what should be a lively debate. The timing appears IS RETURNING Philippines has been actively involved to be right too. The TO CHINA in both the local gold mining sector and The Conference will then be rounded out by liberalisation of China’s the international gold market over the the ever-popular delegate feedback session financial markets is progressing, with past decade and the Assistant Governor will and Conference wrap-up, where those who restrictions on offshore investors’ access to share some of her experiences and thoughts. were too busy to attend all the sessions they onshore equity, bond and commodity futures Following that, Zijin Mining — one of the most wanted to can get a pithy summary (of sorts). markets steadily being lifted. Recent product active Chinese mining groups to This year, we’ve released the developments include the imminent launch invest offshore — will examine WE WISH ALL previous incumbents from this of the SGE & CME Group’s new futures key challenges facing the global CONFERENCE duty and have passed it to the contracts based on the Shanghai Gold mining sector. ATTENDEES A Stan Laurel and Oliver Hardy of Exchange benchmark, the SGE International PRODUCTIVE AND the precious metals markets. That will lead into a panel Board’s ‘Gold Road’ leasing project and session for producers, which will SUCCESSFUL In this centenary year of the plans for an ETF backed by China’s famous be introduced and moderated EVENT LBMA Gold Price, we don’t Gold Panda coins. by Investec’s Gold Portfolio Manager, with underestimate the challenges that parts of the All this activity comes, of course, against contributions from Franco Nevada, Paxos and market are facing, but we also look forward the helpful backdrop of a gold price that had ABC Bullion. with confidence and wishall Conference returned 23% in US dollars by the beginning attendees a productive and successful event. It should prove a lively discussion as there is a of September and surpassed Rmb 350 per lot to talk about – whether shareholder returns, gram for the first time in seven years. It’s use of technology, responsible sourcing, bar also been a fairly dramatic first nine months integrity or the changing refining landscape. for the platinum group metals. So delegates at this year’s Conference can expect to get some interesting insights into these global and regional trends. 3 ALCHEMIST ISSUE 95 The Bank’s Golden Evolution – A Question & Answer session with Victoria Cleland, Bank of England For this issue of the Alchemist, Ruth THE BANK HAS A LONG HISTORY AND A VERY IMPORTANT ROLE IN THE FINANCIAL SYSTEM. CAN Crowell interviewed Victoria Cleland, YOU SAY A LITTLE MORE ABOUT ITS ROLE WITH the Executive Director for Banking, REGARDS TO GOLD? Gold has been an important aspect of the Bank’s role since we were Payments and Innovation at the founded in 1694 (we are celebrating our 325th birthday this year, Bank of England. Here is what alongside the centenary of the first London Gold Price), reflecting we learned. gold’s significance within official foreign exchange reserves. The Bank opened a purpose-built London I HAVE OVERSIGHT OF THE vault in 1697 in response to VICTORIA, BEFORE WE START SECOND-LARGEST GOLD the first significant gold rush. DISCUSSING GOLD, IT WOULD BE VAULT IN THE WORLD BY This saw an influx of gold from INTERESTING TO KNOW A LITTLE BIT Brazil to London. The Bank’s ABOUT YOUR BACKGROUND, SUCH VALUE OF GOLD IN CUSTODY AS YOUR CURRENT ROLE AT THE BANK ‘bullion warehouse’ served the AND THE POSITIONS YOU HAVE HELD entire European market, and the subsequent gold rushes in California, IN THE PAST? Australia and South Africa led to the storage of even more gold in the Bank’s vaults. Thanks Ruth, as Executive Director for Banking, Payments and Innovation, I have responsibility for the operation and strategic Today (a sunny day in early September 2019), we hold around development of our payment system services, including the UK’s Real- 400,000 gold bars in our vaults, currently worth approximately £200 Time Gross Settlement infrastructure, which settles over £650 billion billion, making up 15% of official declared gold reserves globally. We of sterling payments and securities transactions daily. As well as are the largest gold custodian in the UK – we hold over 65% of the having responsibility for our wholesale and retail banking operations, gold in London. I also have oversight of the second-largest gold vault in the world by value of gold in custody. THE BANK’S ROLE IN THE GOLD MARKET HAS A RICH HISTORY, BUT CAN YOU TELL ME ABOUT THE I have spent my career at the Bank of England covering an exciting SERVICES YOU CURRENTLY PROVIDE? and varied selection of jobs. Most recently, I was Chief Cashier, The Bank provides a gold custody service specifically designed for our responsible for banknotes and leading our work on digital currencies. central bank customers. We currently have around 70 such customers I oversaw the launches of the £5 and £10 polymer notes, with and this service supports their reserve management requirements in each bearing my signature. Prior to this, I was Head of the Special gold. Alongside monetary stability, a core part of the Bank’s mission Resolution Unit and Private Secretary to the Deputy Governor. is to maintain financial stability. Our gold service contributes to this by Alongside my day job at the Bank, I am also executive sponsor of our providing central banks with access to the liquidity of the London gold staff disAbility Network and Bicycle Users Group. market, the largest gold market in the world. 4 ALCHEMIST ISSUE 95 The Queen and the Duke of Edinburgh visiting the Bank’s gold vaults in December 2012. The Bank also provides safe custody for the UK’s gold reserves, on behalf of Her Majesty’s Treasury. We also provide services 400,000 to a few commercial firms which facilitate access for central banks to the London gold bars in our vaults gold market.
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