Foreigners now have access to China's gold market after the Shanghai Gold Exchange (SGE) launched its international board on Thursday.

The yuan-denominated board was opened in the China (Shanghai) Pilot Free Trade Zone (FTZ), a move to encourage foreign participation in China's tightly controlled gold market.

The launch will mark the first time China has allowed foreign investors to participate in the country's gold trade.

Despite being the world's largest producer and consumer of the precious metal, China has little say over the pricing of gold in the global market. Authorities hope to gain greater influence over pricing by granting global investors access to the country's 3.2 trillion yuan (522.8 billion US dollars) gold trading market.

The new international board hopes to challenge current gold market leaders London and New York. So far, it has attracted dozens of foreign members, including renowned international commercial and investment banks but it did not release their names.

Gold contracts listed on the SGEI will include a 99.5 percent 12.5 kg contract widely traded among central banks and bullion investors on the global market, a 99.99 percent 1 kg contract traded in China's domestic gold market and 100 gram contract of the same purity. Daily price volatility will be capped at 30 percent on either side of the closing price from the previous day.

"The international board has made China's opening up of the gold market a reality," said Xu Luode, the SGE Chairman, adding that growing participation and rising trading volume will make China a real international market for gold.

"For years, the gold price in the Chinese market has been shadowing that in the west. Overnight trading in the New York and London exchanges would weigh on gold prices in China the next day," Xu said.

"If China wants to have greater pricing power over the bullion, it has to first expand the trading market," said Zhao Qingming, chief macroeconomic researcher with China Financial Futures Exchange.

The international board is the first step for China to transform its gold trading exchange into a regional trading center for precious metals, Zhao added.

Gold contracts denominated in Chinese renminbi will allow gold pricing to better reflect trading activities and demand in China

The SGE has been the top spot gold trading location in the world for 7 consecutive years with trading volume reaching 11,600 tons in 2013.

"A benchmark price for gold could emerge from trading in the Shanghai FTZ and become a potential factor, along with prices in established regional trading centers, to shape global price for bullion in the future, "said Zhou Hao, China economist with Australia and New Zealand Bank.

Yuan-denominated gold contracts also add a new investment option for offshore investors holding Chinese currency.

Global use of the Chinese currency has experienced exponential growth in recent years, as renminbi assets, including deposits, bonds and loans, have reached 1.88 trillion yuan as of the end of last year. It was virtually nothing four years ago, according to the Asia Securities Industry and Financial Markets Association (ASIFMA).

Launching an international board for yuan-denominated gold contracts, is part of a broader effort by Chinese authorities to broaden the range of financial products and increase the renminbi's appeal as an investment currency, according to Zhou.

"When there is more viable renminbi investment options available in the market, investors will be more willing to hold renminbi assets." Zhou said.