(Kitco News) - Surging retail gold demand from unexpected sources this past year has caught the attention of the world’s largest futures and derivatives marketplace.
On Thursday, CME Group announced plans to launch a one-ounce gold futures contract on January 13, pending regulatory review..
This contract represents the smallest gold futures offering from CME. A traditional gold futures contract represents 100 troy ounces of gold. In 2013, the exchange introduced a Micro Gold futures contract, representing 10 troy ounces.
CME’s latest product is specifically designed to cater to the growing retail gold market.
“Gold has always been a popular investment, but retail interest has surged in recent years as more market participants look to diversify their portfolios,” said Jin Hennig, Managing Director and Global Head of Metals at CME Group. “1-Ounce gold futures will broaden opportunities for a wider range of retail traders, providing even more flexibility to access the liquidity and efficiencies that our futures provide.”
The CME noted that the new contract will be cash-settled based on the daily settlement price of the global benchmark Gold futures contract.
The new contract comes amid notable developments in the retail gold market. For instance, giant retailer Costco has transformed the marketplace by offering one-ounce bullion coins and bars to its customers. In September, during its quarterly earnings report, the company revealed that its gold sales had increased by “double digits.”
Costco CFO Gary Millerchip noted in a conference call that gold was a "meaningful tailwind" for e-commerce sales during the quarter.
Market participants are already embracing the idea of a smaller gold contract tailored to retail investors.
“As gold continues to be in high demand, we are pleased that CME Group is expanding its smaller-sized offerings with 1-Ounce Gold futures,” said Isaac Cahaha, CEO of Plus500US, in a press release. “This new contract will make it easier than ever for our global customers to capture gold opportunities in a flexible, cost-effective way.”
“We welcome the introduction of the smaller 1-ounce gold futures contract, as it opens the door for a broader spectrum of investors to participate in gold trading,” added Teyu Che Chern, CEO of Phillip Nova. “Gold is increasingly viewed by our clients as a key component of a well-diversified portfolio.”
In September, Hennig talked to Kitco News about the growth the CME has seen in its mini gold and silver contracts, emphasizing how the smaller contracts have expanded access to the marketplace.
CME recently reported that its Micro Gold and Micro Silver futures products are among the fastest-growing offerings in the metals sector, achieving record levels of participation this year. Average daily volume (ADV) for Micro Gold futures year-to-date reached a record 105,000 contracts, while ADV for Micro Silver futures hit a record 19,000 contracts.
This latest development in the gold market coincides with CME’s celebration of the 50th anniversary of its traditional gold futures contract in September.
