CME launches options for micro gold, silver futures as mini markets see solid growth
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"A wide range of investors believe gold to be a safe-haven asset, especially in periods of volatility and economic and geopolitical uncertainty," said Jin Chang Hennig, Managing Director and Global Head of Metals at CME Group. "Growing demand has driven a spike in CME Group gold markets, with average daily volume in Micro Gold futures increasing 40% from last year and retail participation in our benchmark Gold futures contract up 17% year-over-year. By expanding our offerings to include the new Micro Gold options, traders of all sizes will have even more flexibility to express a view on gold."
The micro market allows investors to buy and sell gold and silver at a reduced cost. Micro futures represent one-tenth the size of a traditional futures contract.
According to trade data, the CME said that its micro gold futures have seen average annual volume growth of 58% since the contracts were launched a decade ago, while micro silver futures have seen volumes increase 93%.
The derivatives exchange also noted that average daily open interest in micro gold has grown 20% annually in the last 10 years. At the same time, open interest in silver has grown on average 36% each year.
SPDR Gold Shares, the company behind the world's largest gold-backed exchange-traded fund (NYSE: GLD), has seen significant growth in its mini gold ETF (NYSE: GLDM).
Since its launch five years ago, GLDM has seen inflows of $6 billion. So far this year, 6 tonnes of gold have flowed into the mini EFT. At the same time, GLD has seen significant outflows of 32.75 tonnes.
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Some analysts have said that the gold's high investment costs are keeping many newer investors away from the market. In the CME statement, Hennig said that the growth of the exchange's micro products is making the market more "accessible and efficient for a diverse range of participants."
While micro and mini accounts have lowered the entry point, some analysts have said there is potential for further evolution in the gold marketplace.
For a growing chorus of analysts and market participants, the digitization of physical gold could create new investment demand from a wide range of investors. A digital marketplace would allow investors to buy fractionalized physical gold through digital exchanges.
In a recent interview with Kitco News, Randy Smallwood, CEO of Wheaton Precious Metals and the Chair of the World Gold Council, said that the world is ready for a digital gold product.
The world right now needs a gold-backed digital token that, through the blockchain, represents physical gold and can be freely traded. The world is ready for a digital currency that is backed up by the promise of real value," he added.
"The world right now needs a gold-backed digital token that, through the blockchain, represents physical gold and can be freely traded," he said. "The world is ready for a digital currency that is backed up by the promise of real value."