On Thursday, gold futures declined for a fourth consecutive session as the dollar received continued support by forecasts that the Federal Reserve will have a more hawkish attitude towards interest rates. The precious metal's safe haven appeal vanished as Ukraine conflicts seemed to progress toward a resolution.
CME Group Inc also announced that later this year it will launch a physically deliverable gold futures contract in Hong Kong. A senior executive of the exchange said this will allow them to capture the Asian region's increasing hedging and investment buying.
New CME contract with Hong Kong announced
The CME's 1 kilogram gold contract was announced as the region's other exchanges are rushing to provide a viable alternative to gold's global benchmark, which has been subject to continuous scrutiny.
Harriet Hunnable, executive director of metal products at CME said, "This contract will provide a precise risk management tool to the Hong Kong market. We know that there are customers who want exposure to what is happening here," according to The Wall Street Journal.
According to World Gold Council China, Asia was responsible for 63 percent of total worldwide consumption of gold jewelry, bars and coins last year. This is an increase from 57 percent in 2010. China, the world's top gold consumer, also announced that on Sept. 29 its Shanghai Gold Exchange is going to start a global version of its gold futures contracts. There will also be a warehouse established in Shanghai's free-trade zone capable of containing as much as 1,000 metric tons of gold. The purpose of the new warehouse is so that Asian regions will use it as a storage facility for gold trade flows, reports Reuters.
The London Bullion Market Association is attempting to develop a transparent electronic alternative in accordance with toughened regulatory benchmarking standards through consultations with market participants. This comes as attention from regulators increased after the manipulation of other market benchmarks.
Xu Luode, chairman of the exchange said, "Our gold market is still very young. We are the biggest market in the world but our influence in the international market is still very small. But by setting up the international board, we can show that our country is open," according to Reuters. He also added that the bourse will later make its silver and platinum contracts available to foreign investors.
Gold falls for fourth consecutive session
Gold futures for December delivery declined $1.50, or 0.1 percent, to $1,243.80 an ounce. This decline came amid continuing efforts in the Ukraine to resolve ongoing conflicts, reports Market Watch.
Spot gold dropped 0.2 percent to $1,246.15 an ounce, after hitting a three-month low of $1,243.56 in the previous session, according to the Economic Times.
The dollar has gained amid forecasts that following next week's meeting the Federal Reserve will change the language in its policy statement. This could potentially spark new expectations for a rate hike next year. It's possible that a stronger dollar could also have a negative impact on commodities sold in the currency, ultimately making them more costly for buyers who use foreign currencies.
Naeem Aslam at Ava Trade said he's not bearish on gold over the longer term as a result of the unknowns concerning geopolitical tensions as well as Europe and China's growth issues. He also said that evidence of rising inflation pressures in the U.S. could also lift gold higher, reports Market Watch.
Meanwhile, silver futures were down 0.4 percent at $18.83 an ounce, after reaching a three-month low. Platinum dipped to a seven-month low of $1.372.70 an ounce, while palladium traded lower by 0.3 percent at $843.80, reports the Economic Times.
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