The Shanghai Futures Exchange will introduce gold futures on January 9 due to rising interest to invest in the precious metal.

 

Each contract will represent one kilogram of gold, with the minimum margin requirement set at seven percent, the country's biggest commodity bourse by value said. Trials for the new product's trading will commence today.

 

The contract threshold tripled the formerly proposed 300 gram level to drive out individual investors with low risk bearing ability. The main function of the futures market is to find a price and hedge against risks.

 

Investors who aim to acquire gold in a physical way, should turn to the spot market, the bourse said.

 

China now offers spot and forward gold trading on the Shanghai Gold Exchange, the country's sole bourse for the previous metal.

 

Gold prices have been rising with wider fluctuation, attracting more investors to pile into the market.

 

Gold prices at the gold bourse have risen 23 percent last year while global gold prices topped more than US$830 per ounce, close to a historical high of US$850 an ounce in January 1980.

 

Analysts said the prices may even soar amid a weak United States dollar and uncertainties in the global economy. The average gold price is likely to hit US$800 an ounce this year, compared with US$696 in 2007, according to the medium estimate of 37 traders, analysts and investors surveyed by Bloomberg News.

 

There is a need for companies and institutional investors to have a means to hedge against the risks via the futures market, the country's top regulator on securities and futures said earlier.

 

(Shanghai Daily January 2, 2008)