The lead story in yesterday’s John Lothian Newsletter was a Reuters report that said CME Group is planning to launch a gold futures contract in Hong Kong by year end. We were a little uncertain about how this would work, since the CME does not have an exchange located in Hong Kong, so we spoke with the CME about it.
According to a CME spokesman, the news was announced by the CME’s managing director of metals products, Harriet Hunnable, during the China Gold Congress this week in Beijing.
The contract will be a kilo gold futures contract. It will be listed on COMEX and physically settled and delivered in Hong Kong at exchange-approved vaults, and it will be tied directly to the price of bullion of 99.99 percent purity in Hong Kong. Detailed contract specs are not available yet, but the new kilogram contract will be similar in structure to the exchange’s benchmark 100-ounce COMEX gold futures contract. It will be denominated in US dollars and geared toward global participants who want to manage their exposure to regional gold prices. As the Reuters story mentioned, Asia accounted for 63 percent of total consumption of gold jewellery, bars and coins in 2013, up from 57 percent in 2010, according to the World Gold Council.
Three vault companies in Hong Kong have already applied to be registered with CME Group to house the physical product: Brink’s Global Services, USA, Inc., HKIA Precious Metals Depository Limited, and Via Mat Management AG.
A link to their application is here: http://www.cmegroup.com/tools-information/lookups/advisories/market-regulation/MKR09-11-14.html.