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Three Years Of Record Growth Proves Gold Remains Relevant - CME

Kitco News

BOSTON -(Kitco News) - While gold investors have lamented the lackluster price action as a sign that nobody cares about the yellow metal, the world’s most liquid gold markets said that perception is the farthest thing from the truth.

Young-Jin Chang, global head of metals at CME Group

In an interview with Kitco News on the sidelines of the 2018 London Bullion Market Association annual Precious Metals conference, Young-Jin Chang, global head of metals at CME Group, said that the exchange is expecting to see its third year of record growth in metals trading.

It its recent third-quarter earnings report, CME Group reported an 18% increase in trading volume in gold futures.

“In the last three years, metals trading has been one of the fastest-growing sectors in the CME,” she said.

While most speculators have been significantly bearish on the yellow metal, holding record short positions in CME futures contracts, Chang said that they are starting to see growing interest from investors who are looking for more defensive assets.

“There is a lot of uncertainty and a growing lack of confidence in the global economy, and because of that, we think more people are turning to gold,” she said. “Gold’s relevance in the market has not diminished. We have seen tremendous growth in the last three years.”

Although North American investor interest plays an important role in the gold market, Chang said that the exchange has actually seen superior growth from Asia and Europe. She added that the growth from non-U.S. investors demonstrates the yellow metal’s global appeal.

“The growth we are seeing is another indication that the world is becoming more connected and information flow is very fast,” she said. “Regardless of where you are in the world, in a world with increasing economic risk, you have access to a deep liquid gold market.”

Another growth trend the CME is seeing, Chang said, is in less expensive and lower-risk derivatives. She explained that the exchange has seen triple-digit growth in its weekly options. Chang added that in August alone, when gold fell to a 1.5-year low, the exchange had a 29% increase in options volume.

“A lot of the demand for our weekly option is coming from the retail market,” she said. “It allows investors to have exposure to gold without taking on a huge amount of risk.”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.