Malaysia to Start Gold Futures Trade as Investor Demand Expands

by **Cals** Thu 03 Oct 2013, 11:59

Malaysia to Start Gold Futures Trade as Investor Demand Expands
By Glenys Sim - Oct 3, 2013 11:19 AM GMT+0800

Malaysia’s first gold futures contract will start trading on Oct. 7 to meet investor demand, according to the head of the country’s derivatives exchange.

Gold prices will continue to be volatile and the 100-gram, ringgit-denominated contract will allow investors to trade without worrying about currency fluctuations, Chong Kim Seng, chief executive officer of Bursa Malaysia Derivatives Bhd., said in an interview. Bullion for delivery up to one year will be cash settled and benchmarked against the London fixing, he said.

Enlarge image[You must be registered and logged in to see this image.]
A shopper looks at Poh Kong Jewellery shop's display of gold jewelry in the 1 Utama shopping center, in Petaling Jaya, Malaysia. Photographer: Goh Seng Chong/Bloomberg

[You must be registered and logged in to see this image.]

4:33

Oct. 3 (Bloomberg) -- Chong Kim Seng, chief executive officer of Bursa Malaysia Derivatives Bhd., part-owned by CME Group Inc. and a unit of Bursa Malaysia Bhd., talks about the launch of a gold futures trading service. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move." (Source: Bloomberg)
Gold slumped into a bear market this year after 12 annual gains, spurring increased demand from buyers in Asiaincluding China, Thailand and Indonesia. Malaysia imported 9 billion ringgit ($2.8 billion) of gold in 2012, mainly for processing into jewelry, and exported about 7 billion ringgit of gold jewelry, said Chong. Gold imports totaled 6 billion ringgit in the first half, signaling increased physical demand, he said.
“The small contract size means retail customers, big or small, can be involved and traders who want to do hedging can just do multiples,” said Chong. “The issues that’s facing the U.S., the government shutdown and the tapering policy, have an impact on the U.S. dollar and interest rates, so it’s important that people consider gold as part of their portfolio.”
Gold for immediate delivery, which traded at $1,313.85 an ounce, has declined this year on speculation the U.S. Federal Reserve will taper stimulus as the largest economy strengthens while inflation fails to accelerate. Bullion rose 2.2 percent yesterday and fell 3.1 percent on Oct. 1 as the U.S. federal government’s first shutdown in 17 years began.
ETP Holdings
Rising demand for gold in Asia helped offset record sales from bullion-backed exchange traded products. Holdings that increased every year since the first product was listed in 2003 have shrunk 705.7 tons this year, reaching a three-year low of 1,926.2 tons yesterday, data compiled by Bloomberg show.
Demand for gold in Malaysia may increase as investors seek to hedge against a depreciating currency. The ringgit is the worst performer in Southeast Asia this year, with a 4.5 percent loss, after Indonesia’s rupiah and the Philippine peso.
“There’s a lot of investing interest out there in the marketplace and a need for a more safe and trusted regulated platform,” said Chong. Bursa, part-owned by CME Group Inc. and a unit ofBursa Malaysia Bhd. (BURSA), may start gold options and silver futures contracts later on, he said today.
To contact the reporter on this story: Glenys Sim in Singapore at [You must be registered and logged in to see this link.]
To contact the editor responsible for this story: James Poole at [You must be registered and logged in to see this link.]