Hong Kong Mercantile Exchange Launches Gold Futures

Source: Reuters (5/18/11)

"The HKMEx is hoping to cash in on explosive investment demand for gold from mainland China."

Reuters

The Hong Kong Mercantile Exchange (HKMEx) launched a gold futures contract on Wednesday, hoping to cash in on explosive investment demand for gold from mainland China.

The front-month contract rose half a% from the open to $1,493.6 an ounce by 0916 GMT, with volumes of 1,694 lots of 32 ounces per lot.

The gold contract is priced in U.S. dollars and delivered physically in Hong Kong.

One dealer said strict Chinese regulations kept interest muted.

"So far there is not much interest in the product," said Peter Fung, head of dealing at Wing Fung Precious Metals in Hong Kong.

Chinese investors are not allowed to trade futures offshore, and investors elsewhere have access to COMEX gold futures, a key gold futures market, nearly 24 hour a day. But HKMEx gold may gain traction if Chinese regulations loosen up, Fung said.

COMEX gold GCcv1 gained 0.8% to $1,492.60, with trading volume at 28,686 lots of 100 ounces per lot.

"We're going to host other products, other metals and energy," Albert Helmig, president of the exchange told Reuters Insider TV, adding that HKMEx would offer products in Chinese yuan in the future.

Hong Kong Exchanges and Clearing Ltd offers a gold contract <0#HGLD:> that is also priced in U.S. dollars. The Chinese Gold & Silver Exchange society operates a spot gold exchange with trading in Hong Kong dollars.

Hong Kong is an international gold trading center with a bonded gold warehouse at the airport, and a major conduit for gold flow into China.

Trading hours on the contract are from 8 A.M. to 11 P.M. local time, or 0000 GMT to 1500 GMT.

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