CME Starts Gold Futures in Hong Kong in Price-Benchmark Race

CME Group Inc. started physically delivered kilobar gold futures in Hong Kong as it joins other exchanges vying to establish new price benchmarks in the top user region.

The contract listed on the Comex is tied directly to the price of bullion of 99.99 percent purity in Hong Kong and will be physically delivered to vaults in the special administrative region. CME, owner of the largest futures exchange, said in September that trading may begin in the fourth quarter of 2014.

The Shanghai Gold Exchange started bullion trading in the city’s free-trade zone on Sept. 18 while Singapore Exchange Ltd. began a wholesale kilobar contract on Oct. 13 as more of the world’s gold is processed and used in the region and the 95-year-old fixing benchmark in London gets overhauled. Almost two-thirds of gold jewelry, bars and coins were consumed in Asia in 2013, according to data from the World Gold Council.

“The success of the contract depends if it can get the liquidity,” said Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. in Singapore. “Hong Kong is as close to China as you can get without being onshore, so it might appeal to those that don’t have a license to trade onshore. People like to trade the China-London price differential.”

Gold kilo futures for April delivery opened at $1,300.20 an ounce. Investors will be able to make and take deliveries of one-kilogram bars in Comex-approved vaults operated by Brink’s Inc. and Malca-Amit Far East Ltd. in Hong Kong, CME said in a Jan. 6 statement.

Fix Replacement

Intercontinental Exchange Inc., Europe’s largest derivatives bourse, is planning to start trading gold futures in Singapore on March 17, it said in December. The exchange’s ICE Benchmark Administration will run the replacement for the London gold fix and the pricing platform is expected to go live in the first quarter of this year.

Bullion for immediate delivery in London lost 1.4 percent last year after declining 28 percent in 2013 as the Federal Reserve ended stimulus and moved closer to raising borrowing costs. Prices, which traded at $1,291.95 by 2:32 p.m. in Singapore, rebounded 9.1 percent this year as central banks from Europe to Japan and China take steps to spur their economies amid slowing growth.

Before it's here, it's on the Bloomberg Terminal.