CME introduces 1kg PHYSICAL gold futures to meet Asian demand

swissaustrian

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The CME Group (includes COMEX) has realized that Asians like physical.
So they came up with a product to meet that requirement:
Gold Kilo Futures (GCK)

The physically-delivered Gold Kilo futures contract is designed specifically to meet the needs of the growing requirements in the Asian bullion marketplace.

The COMEX-listed Gold Kilo Futures contract will offer the ability to make or take delivery of kilo gold bars with minimum 9999 fineness at CME Group-registered and regulated facilities in Hong Kong. This contract offers a liquid and cost-effective price discovery tool and a precise instrument to manage risk for those with price exposure to the Hong Kong gold market and other regional markets.

A natural extension of the CME Group precious metals complex, Gold Kilo futures also enable customers to take advantage of our readily accessible round-the-clock electronic execution and trusted clearing house model along with the proven integrity and reliability of our delivery process.

Backed by CME Group’s worldwide infrastructure and distribution, the contract will enable unparalleled access to trade gold in kilo-sized units.

Benefits

Physically delivered, with delivery in Hong Kong at Exchange-approved vaults
True intraday price and spread transparency across the futures curve
Round-the-clock spreading and arbitrage opportunities with other world gold markets
Security and superior financial integrity enabled by straight-through clearing and processing via CME Clearing – the world’s premier clearing house
Margin offsets against other benchmark COMEX products and the entire suite of CME Group contracts :doodoo:
http://www.cmegroup.com/trading/metals/gold-kilo-futures.html

This is interesting for a number of reasons:
1. The emphasis on "physical delivery" tells you something about the nature of the regular gold futures contract.
2. CME is feeling that the center of gravity in the gold market is moving to Asia. I bet that they had issues with deliveries on the regular gold futures contracts, especially shipments to Asia and rapidly depleting warehouse inventories in the US.
3. Should there ever be a panic to get phyiscal, there will be a divergence between the regular/paper futures contract and the new 1kg/physical contract. You could short the former and go long the latter if you wanna bet on that. As long as there is no divergence, this is a neutral trade in terms of exposure. The only cost are fees and commissions.
4. "Margin offsets against other benchmark COMEX products and the entire suite of CME Group contracts" means you can effectively pledge your phyiscal for paper trades in other (paper) futures markets. That might open up the possibility for all kinds of shady games :doodoo:
 

ancona

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I think they are just trying to catch up with Asian markets and continue to sell paper with a promise to deliver after all the hoops have been jumped through. You and I could never take delivery from CME.

The Crimex is a giant scam just as the London pool is.
 

Penn

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It sounds good- but I would bet there is an escape clause in it.
 
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