Singapore Launches Massive Gold Contract

  • Posted Monday, July 28, 2014 at 01:35 PM

Los Angeles CA, July 28 (Tangible Investments) - by James O’Dell - Gold and Silver prices rebounded sharply on Friday with Gold soaring $15.35 or 1.19 percent to finish the week at $1,308.55 an ounce even as the dollar hovers near six month highs and Comex August Gold futures options expire on Monday. The Silver price added $0.36 or 1.76 percent to end the week at $20.40 an ounce, while the Gold/Silver ratio fell to 63.03.

"Gold will likely enjoy a measure of stability at least in the early part of the week on account of the deteriorating situation with Russia and the expected stiffer round of sanctions being contemplated by the Europeans," said Edward Meir of INTL FCStone, in a note.

Meanwhile, in an attempt to speed Gold's migration from West to East, the Singapore Exchange recently announced that it is launching the world's first wholesale 25 kilo bar Gold contract, that's double the size of a typical London Good Delivery Gold bar, and it will be made up of six daily contracts. "This Gold contract is a plan two years in the making," said Albert Cheng, of the World Gold Council (WGC). "The reason is that we have seen a trend of Gold moving from West to East and there is actually no market place for market players to buy Gold at a wholesale level."

It's clear that Singapore is targeting institutional buyers with this contract. "There is a robust London market, and that comes in later in the day. But in Asian hours – there is no morning market for wholesale trade. Having a structure means the wholesaler can contribute to the market, which then becomes more transparent," said Cheng.

Price discovery in Singapore makes sense says Cheng, after all, Asia is not only the world's top buyer of Gold, it is also the world's largest producer. "This contract is meant for the Asian market," he added, which may account for the fact that the contract will only trade for three hours each day.

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