Shanghai Gold Exchange Planning to Offer Forwards and Options in Gold

Sources close to the Shanghai Gold Exchange revealed to Business Standard today that they are currently in the preliminary stages of establishing forwards and options trading, two investment options that could help the country's efforts in their bid to administer London's gold fix.

China is the world's largest consumer of gold and with India accounts for 70% of worldwide demand. The London Gold Fix is in the process of undergoing a makeover and a search for a new benchmark administrator is currently underway. The London Gold Fix has been subject to an industry-wide call for new methodologies after multiple lawsuits were filed earlier this year alleging illegal manipulation of the pricing.

It has not yet been announced when trading of the speculative derivatives will begin, but last month the SGE launched its International Bourse which allowed foreign banks to trade in yuan-denominated contracts. There has already been significant interest and now the exchange is planning to "expand its product line".

Options are said to be launched first, on the main board, but only be available to domestic investors. Forwards will be offered next and will initially be offered only to international investors.

Sources also indicate that the Shanghai Futures Exchange is also considering offering gold options trading.