LME mulling launch of gold and silver futures contracts – sources

Jan 8, 2015 - 9:26 AM GMT
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The London Metal Exchange is mulling the launch of monthly gold and silver futures contracts, industry sources told FastMarkets.

The dollar-denominated gold contracts will be physically settled – probably against the LBMA good delivery list, which sets and regulates the acceptable requirements for large gold and silver bars.  

The LBMA publishes a list of “acceptable refiners” whose large bars weigh around 400 ounces (12.5kg).

The exchange is also said to be mulling a mini contract alongside the primary gold facility as well as a silver contract – also alongside a mini contract – with a view to introducing similar products for platinium and palladium in the future, sources added. 

The LME, which declined to comment, has had six silver contracts in its history, the latest in the 1990s and none of them successful.

But this would be the exchange’s first solo foray into gold futures trading – it was part of a joint venture with gold industry participants in the London Gold Futures Market (LGFM) in 1982 but the lack of domestic and speculative investors caused the market to close within three years.

In this instance, however, the contracts are likely to be in US dollars and will be monthly futures contracts that are not tied to the LME delivery network.

In November last year, LME chief executive Gary Jones said at a conference in Shanghai that the exchange still had ambitions to get into the gold market despite recently losing out in the race to administer the new London gold fix.

“We didn’t get the gold fix and that was very disappointing but this doesn’t mean that we are not interested in gold any more,” he told FastMarkets at that time.

“We haven’t given up on [gold]. We are looking into possibly offering to clear gold and silver on LME Clear,” he said, adding that the LME was well placed to be a home for a London reference price via its new LMEBullion system.

The LME won the administration of the platinum and palladium price benchmarking in October – it took over the running of the process from December 1 using its LMEBullion system.

 

(Additional reporting by Perrine Faye, editing by Mark Shaw)