Gold glitters on debut at futures exchange

GOLD futures debuted on the Shanghai Futures Exchange today and most contracts hit the daily trading cap as international prices of the precious metal climbed to records.

Total trading volume topped 121,468 lots compared with 267,516 lots of copper, the most active commodity traded on the bourse.

Au0806 gold, the most heavily traded gold contract, closed at 223.30 yuan (US$30.72) a gram, or 6.34 percent, after touching a high of 230.99 yuan, the daily trading cap. The contract opened at 230.95 yuan.

"The launch of gold futures is a significant step for China's futures and financial market," said Shang Fulin, chairman of the China Securities Regulatory Commission.

Traders were bidding at the 10 percent daily trading cap on the opening of most contracts, indicating strong confidence gold's bullish run will continue.

The first trade was made by two listed companies – Zhongjin Gold Co as seller and Jiangxi Copper Co as the buyer for six lots.

Gold hit US$880 an ounce in New York yesterday.

Gold prices soared on concerns of inflation, higher oil prices and a weak US dollar. Some analysts even expect the metal to crack US$1,000 an ounce this year.

The daily trading limit was 10 percent yesterday in a bid to attract more transactions. The limit will be five percent on normal trading days.

"Gold attracted investment interest with its hard currency status," said Cai Luoyi, general manager of the research center of Shanghai CIFCO Futures Co. "It's not only an investment option on the futures market but it also acts as a hedge."

The expectation of higher prices will also thrust the shares of listed gold miners, said Sun Zhaoxue, chairman of the China Gold Association.

Three listed gold miners all rose yesterday, outperforming the benchmark index.

To trim risk, the Shanghai Futures Exchange increased he minimum margin requirement to nine percent in the early days of trading. The figure will drop to seven percent after the period, the country's biggest commodity bourse by value said, without giving a time frame.

Each contract, or lot, represents one kilogram of gold.

Trials for the new product commenced on January 2 and ended yesterday.