Gold exchange to launch trading in silver futures

PUBLISHED : Monday, 18 June, 2012, 12:00am
UPDATED : Monday, 18 June, 2012, 12:00am


The Chinese Gold & Silver Exchange Society is launching silver trading in three different currencies, predicting continued gains in precious metal prices and rising mainland demand.

'Gold and silver prices have fallen this year, but we expect them to rise again in the fourth quarter. It's a good time for us to reintroduce silver trading,' Haywood Cheung Tak-hay, president of the gold bourse, told the South China Morning Post.

'Given that there's no sign of any resolution to the euro-zone crisis, gold and silver look like a safe haven for investors,'' Cheung said.

The planned move is part of a broader strategy by Cheung, who is widely expected to be re-elected as the exchange's president for another two years. He introduced gold trading in yuan in October.

The society was set up in 1910. At its peak in the 1980s and 1990s, all major overseas gold trading firms traded on the market. The gold bear of the mid-1990s eroded its turnover, but gold trading has bounced back in recent years. The exchange previously had silver trading, but turnover dwindled over the past 20 years.

Cheung said the exchange plans to launch silver futures in Hong Kong dollars, followed by US dollars and later by yuan. Investors could settle in cash or opt for physical delivery.

The exchange would use gold warehouses at the Hong Kong International Airport to store the physical silver for delivery, he said.

'I believe international investors would like to trade silver in Hong Kong, because they can easily pick up silver bars at the airport for delivery to transport to other countries,' he said.

'In addition, we will offer them three different currencies to trade in: Hong Kong dollars, US dollars and yuan. No other market around the world provides this service.'

Cheung said investors and end users would trade futures in silver, which is considered both an industrial metal and a precious metal.

'Mainland Chinese are major consumers of silver nowadays, and it would be good for Hong Kong to have silver futures trading for them to hedge risks,' he said.

'The launch of silver trading would be in line with China's 12th five-year plan, [one aspect of which is] to strengthen Hong Kong as an international financial centre by promoting more commodities trading.'

The price of silver has traversed a major cycle over roughly the past three decades.

In its heyday in 1980, at the height of the Hunt brothers' corner, silver hit US$50 per ounce. The metal fell to US$3.50 per ounce in 1993, languished at US$6 for a long time, and shot to about US$21 per ounce in 2007. It almost reclaimed its 1980 high on April 25 last year, when it hit US$49.80 per ounce. Now it has fallen to US$28.70.

Brokers said silver is thinly traded, compared with gold, which makes it susceptible to big moves in price.

The Hong Kong Mercantile Exchange, which also trades gold, introduced silver futures in July last year aimed at public investors.

The new instrument has drawn modest early support. On Friday, 1,191 contracts of silver futures traded, while more than 9,000 contracts of gold futures changed hands.