Concern over new gold trading
Gold traders have expressed concern over thin trading for new types of gold futures contracts, which they say may overlap new futures contracts in the spot market and be an indication of a significant drop in Singapore's futures market.
As such, they urged the Stock Exchange of Thailand (SET) to discuss the issue with its members before setting a policy to tackle the problem.
An anonymous source from a gold brokerage house said: "New product types may determine a shorter maturity for gold futures of one to two days and that could make it as real time as the gold price and similar to the gold spot market.
"These two products may be overlapping and that could negatively impact on the principles of futures contracts in reference to prices in the future."
New gold futures may be linked to those on the futures market in Singapore, where there are more products with shorter and longer maturities, the source said.
Singapore’s futures market has significantly dropped, the source said.
The source said the SET has discussed the issue with the Gold Traders Association but has not talked to SET members,
The source urged the exchange to discuss the matter with its members before setting a policy to deal with it.
In response to the news that the SET may abolish its plan to set up a gold market, Kritcharat Hiruyasiri, president for Mae Thong Suk Group, the country’s leading gold trader, said that the market would be in addition to products on the Thailand Futures Exchange.
"Earlier, several parties had realised that it’s not worth establishing a gold futures market, as the expense may be very high and not worth operating," Kritcharat said. "Having more products with a shorter maturity to meet demand may be the solution," he said
Kritcharat said new gold futures would have a very short maturity, similar to those on the spot market, and this could allow investors to trade gold at current prices, which could boost trading.
Other details, including pricing, are under the SET’s consideration, Kritcharat said.
Kamonthan Pornpaisarnvijit, director of the Gold Research Centre, said gold futures were maturing at between three to six months, providing investors with two costs – the cost of gold, whose prices move up or down based on the global gold market – and the cost of a maturity close to the end, which could prompt a decline in gold futures.
New gold products without a maturity determination could help solve contract impairments and directly refer to the gold price and better reflect the real cost of gold, he said.
