Precious Metals Markets: China vs US

In anticipation to the launch of the Shanghai Gold Exchange international board, that presumably will start shifting gold pricing power from West to East, in this post we’ll examine the historical trading volumes of the Shanghai Gold Exchange (SGE), the Shanghai Futures Exchange (SHFE) and the COMEX. By charting the weekly volumes we get a clear view of the size of these exchanges. (In the London Bullion Market most likely the largest volumes are traded, but because this is an OTC market that doesn’t disclose much data we can’t use it in our West – East comparison.)
From now on I will publish the trading data of all three exchanges after every trading week to closely monitor if the gold market’s center of gravity is moving to Asia.
The largest precious metals futures exchange in the world is the COMEX located in the US. This exchange started trading silver futures in June 1963 and gold futures in December 1974. Futures are a derivative of an underlying asset, in this case precious metals, as they are traded on margin. Through futures traders can take on positions in precious metals but only deposit a fraction, the margin, of the total cash value in advance. This provides leverage; price movement is magnified relative to the margin on deposit. Futures can be used, for example, to hedge or speculate. Historically the COMEX has been the dominant futures exchange in the world and plays a significant role in the pricing of precious metals.

This post was published at InGoldWeTrust on August 30, 2014.

 

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