Gold's Record Run Fueling A Surge In Derivatives Trading
25 Novembre 2009 - 9:51PM
Dow Jones News
Futures traders are piling into gold futures markets around the
world, lured by the luster of record-high prices in the precious
metal.
Metals trading at CME Group Inc.'s (CME) Comex exchange, home to
the benchmark gold futures contract, has surged 43.5% this month
over October levels as participants ramp up activity and more
international investors jump into the market, according to exchange
officials.
Gold markets operated by NYSE Euronext (NYX), the Tokyo
Commodity Exchange and the Thailand Futures Exchange have also
registered a bump in trading over the past weeks.
"The product has more eyeballs on it," said Joseph Raia, CME's
managing director of energy and metals. "We're seeing a lot more
focus on that marketplace from all aspects of the trading
community."
A conflagration of factors has driven up the price of gold in
recent weeks, with February-dated contracts at Comex setting a
fresh record of $1,189 a troy ounce around midday Wednesday.
Gold has soared as central banks, led by India, began building
their gold reserves this month in a move to diversify away from a
weakening dollar, while investors seek protection from potential
inflation in a low interest rate environment.
Debate among Federal Reserve officials--highlighted in the
minutes of the latest monetary policy meeting--over whether to
intervene in asset price bubbles drove more activity in the market
this week.
Meantime, recent buzz around the market has seen some wayward
investors return.
"The crash in commodities markets last year really left a sour
taste in a lot of commodities traders' mouths," said Rob
Kurzatkowski, a futures analyst with optionsXpress (OXPS). "They
were really hesitant to come back in the early portion of this
year."
This especially is the case in gold, as the market has formed a
base at the $1,000-an-ounce level. Traders were encouraged when the
metal fell back from its mid-October highs but held around $1,025
in late October, Kurzatkowski said.
More international participants are entering the market as well.
Raia said overnight trading in its metals products typically
amounts to 15,000 contracts traded by the time he arrives at CME's
New York offices in the morning, but lately that number has been
around 70,000.
Gold's $1,000 milestone caught many investors' attention, but
Raia said the late 2006 migration of Comex products to CME's Globex
electronic trading platform has also helped build liquidity and
made it easier for firms in Asia and other regions to trade.
CME's metals products last month accounted for about 2.2% of
overall volume, with an average 239,000 contracts changing hands
each day.
Metals made up only about 3% of CME's third-quarter revenue, but
the contracts carry higher fees than other product groups, making
them more profitable.
Other exchanges also are basking in gold's glow. NYSE Liffe US,
which operates gold and silver markets, has seen a 20% rise in
average daily volume from October to November.
Gold futures volume at the Tokyo Commodity Exchange has risen
each of the last three months, with November trade on pace to top
October levels. The Thailand Futures Exchange saw contract volume
increase by more than ten times month-to-month, as open interest in
its gold futures has nearly doubled from the beginning of the month
to Tuesday.
Raia said CME is also looking to capture more of the gold
trading that happens off-exchange after fallout from the credit
crunch slowed trading in London's inter-bank gold market, which
remains far larger than its on-exchange counterparts.
CME has introduced a gold forward contract to its ClearPort
service, which clears such privately negotiated transactions, but
Raia said that activity remains muted as banks work through
technology issues.
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com
-By Allen Sykora, Dow Jones Newswires; 541-318-8765;
allen.sykora@dowjones.com
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