Updated: 06/26/2014 00:13

Singapore to offer the world's first exchange-traded wholesale kilo gold contract



Singapore to offer the world's first exchange-traded wholesale kilo gold contract

Regional wholesalers and corporates with large appetites for gold will soon have a reference point for prices. 

That's because Singapore will offer the world's first exchange-traded wholesale kilo gold contract by September this year. 

The contract, to be listed on the Singapore Exchange or SGX, is the first wholesale 25 kilo bar gold contract to be offered globally. 

It's the result of a collaboration between International Enterprise or IE Singapore, Singapore Bullion Market Association, SGX and the World Gold Council. 

One lot consists of 25 kilogrammes of gold traded in US dollars. 

SGX says trading will run for three hours from 8.30am in the morning and there'll be six contracts awarded at the end of each session. 

The gold will be delivered physically to the end-users within two days. 

SGX says the contract is targeted at bigger industry players such as banks, wholesalers and jewellers. 

Trade Minister Lim Hng Kiang says the introduction of this contract is a timely one given the increased requirements for the transparency of gold reference prices. 

Mr Lim was speaking at the annual London Bullion Market Association Singapore Market Forum. 

"With SGX as the independent matching and clearing entity, this physically-settled contract will create a more transparent and efficient marketplace for kilo bar trades. The exchange will also act as a centralised clearing house to reduce settlement risk among multiple counterparties." 

President of Singapore Bullion Market Association Ng Cheng Thye says having a reference point for gold prices will benefit consumers. 

"There's no proper kilo bar prices in dollar terms. Especially since last year, we've seen there's a very erratic premium happening in the kilo bar market in the Asia region. Each country has quoted different prices that can be as far apart as $100 differences. End up we have been getting complaints and calls from the consumer." 

IE Singapore adds that this move is an effort to become a gold hub in South-East Asia. 

Data from the World Gold Council shows that while global consumer demand for gold has increased nearly 50 per cent over the past 10 years, the demand in South-East Asia has increased exponentially by over 250 per cent during the same period. 

By Gwen Goh

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