The race to win over gold buyers in Asia has well and truly begun with China advancing the launch of the International Board of the Shanghai Gold Exchange. Singapore Exchange (SGX) and Dubai Gold and Commodities Exchanges (DGCX) are the others who are coming up with their own launches, aimed at attracting Asian bullion traders and investors.
Originally slated to be launched on September 29, the International Board, which will function from China’s Shanghai Free Trade Zone and allow domestic and overseas players to take part, will begin trading from Thursday. The early launch comes even as SGX has delayed the start of its 25-kg gold bar physical delivery contract. The contract was scheduled to be launched this month but has now been put off to late October or November. “We will launch the physical gold contract in one to two months. We aim to come up with an Asian benchmark for gold,” said Derek Neo, Associate Director, Commodities, SGX.
“This will help Indian bullion trade since they will get the price trend in Singapore. Besides, they can also buy to meet their needs,” he said on the sidelines of a gold seminar in Pune. Asked about Shanghai Gold Exchange International Board launch, Neo said that SGX’s contract was different since it is physical. However, the bullion trade feels that SGX perhaps wants to take advantage of its geographical location. “We feel our contracts could attract Indian interest because there is already some interest from the subcontinent in our iron ore and coal contracts. Some Indian firms have interests in Indonesian mines, therefore the interest is natural,” said Neo.
The DGCX will be launching spot trading in one kg gold (995 fineness) in Dubai prices. “It is a T+2 contract deliverable in three places in Dubai, including the gold souk,” said Ian Wright, Chief Business Officer of DGCX.
The feature of the contract is that a seller will not be obliged to deliver and he/she can roll over the position. But that will cost a 3 per cent trading margin besides a delivery margin of 20 per cent to the seller, said Wright.
DGCX, which has tasted success with the rupee-dollar futures that account for 90 per cent of its trade volume, will follow the one kg gold bar contracts with a mini gold 100 gm contract that will be trade in Indian rupee and settled in cash.