New spot gold trading mart draws yawns from investors
Tokyo (Oct 26) Spot gold trading on the Tokyo Commodity Exchange continues to be disappointingly slow, three months since Tocom launched the new market.
Tocom created the market on July 25 on top of gold futures trading to increase options, hoping to attract more individual investors and stimulate trading. But trading remains sluggish due in part to a delay in the preparation of sales rules.
"Turnover is staying low because we launched spot trading in the same framework as for futures trading," Tocom President Takamichi Hamada said. "We were ill-prepared."
The spot gold trading market on Tocom is direct online trading in gold bullion, consisting of transaction sizes of 100 grams and 1kg. Although 14 contracts were concluded on the first day of trading, only one contract has taken place per day on many trading days since August. No deal has been done for 1kg to date.
Spot gold trading usually takes place at precious metal shops which set prices based on international prices and foreign exchange rates among other factors. As trading on Tocom involves direct transactions through commodity futures companies, investors can buy gold under more favorable terms from time to time.
But over-the-counter gold trading has grown more active. "Trading had been slow for the lack of price movements until September but has increased in October partly because of price falls," said an official at leading precious metal trader Tanaka Kikinzoku Kogyo.
Gold sales are increasing sharply at Tokuriki Honten in October, according to the venerable gold refining and trading company.
Investment in spot gold is less risky than in gold futures. But a Nissan Securities official said, "Formalities have become more complicated on the part of investors because we sell Tocom-listed spot gold in accordance with the commodity derivatives act."
Over-the-counter sales of gold are simple and prices are little different from those on Tocom, said an official at a commodity futures company that has continued the selling practice. "Frankly, we see few merits in recommending trading on Tocom," he added.
As a disadvantage of trading on Tocom, investors are not permitted to designate brands of gold they intend to buy. "As brand power built up through long years of trust and trading is important for spot gold transactions, business practices are different from those in the gold futures industry," an executive at a major precious metals shop said.
Source: TheAsian
