Top consumer China launched a yuan-denominated gold benchmark on Tuesday, as the country took an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.

The benchmark is a culmination of efforts by China over the last few years to reform its domestic gold market in a bid to gain a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is set.

As the world's top producer, importer and consumer of gold, China has baulked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.

The new benchmark may not be an immediate threat to London, but with time and full convertibility of the yuan it could become widely used and help China's efforts to boost the global use of its currency.

The Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan per gram ($1,234.49 per ounce) in Tuesday's morning session.

"The Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price ... will help improve yuan pricing mechanism and promote internationalisation of the Chinese gold market," Pan Gongsheng, deputy governor of the People's Bank of China said at the launch in Shanghai.

The benchmark price will be set twice a day following a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform.

The London afternoon fix on Monday was set at $1,234.30 an ounce.

The members in the yuan gold fixing process include China's big four state-owned banks, Standard Chartered, ANZ , jewellery retailers and gold miners.

The yuan price will be complementary to the prices in London and futures trading hub New York, the World Gold Council (WGC) said.

"It is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East," WGC's CEO Aram Shishmanian said.

LIMITED USE

The launch of the yuan gold benchmark does not necessarily mean all market participants in China will begin to use the price for imports, sales and other transactions.

While domestic players could start to use the price immediately, foreign suppliers might have reservations. The London price has for over a century been accepted as the benchmark price.

"(They) are aware it is a time consuming process. It is not going to happen in one day, one month or even one year," a source familiar with SGE's thinking said.

"China has to show to the world over a consistent period of time that the price is open, rational, reasonable and that there is no manipulation."

Transparency in the fixing process has come under scrutiny since a scandal broke out in 2012 over the rigging of the London interbank offered rate, or Libor.

The London gold fix, previously set via a teleconference among banks and facing allegations of manipulation, was replaced in 2015 by electronic auctions.

$1 = 6.4732 Chinese yuan renminbi