Gold, Silver, Platinum and Palladium are commonly referred to as Precious Metals.
Gold is considered predominantly an investment asset with demand in the form of bars, coins and jewelry contributing to over 79% of the total demand. Other uses for Gold include dentistry and electronics and investments such as ETFs. Silver, and to a larger extent, Platinum and Palladium are used more frequently in industrial applications.
The supply of precious metals mostly depends on the global mine output. Since 2007, China has surpassed South Africa and has emerged as the largest producer of gold in the world. Mine production from China has increased to over 300 tonnes per annum. Nevertheless, South Africa still has the largest (below ground) reserves of Gold (13% of the global reserves). The recycled (scrap) Gold is also a major source of supply, with Turkey having the largest share of the global Gold scrap supply market. India is the largest consumer of Gold jewelry followed by China, USA, Saudi Arabia and Turkey.
Over 50% of the total demand for silver is for industrial applications (including photography, electronic equipments, etc.) with jewelry and silverware (24%), investment demand (14%) and coins (9%) contributing to most of the other demand drivers. Over 78% of the global silver supply is dependent on mine output. Silver is usually produced as a by-product in the process of mining base metals. Peru is the largest producer of silver, followed by Mexico, Australia and China.
The most important price driver for Platinum and Palladium is their use for making catalytic converters for automobiles.
London, Zurich and New York have evolved as some of the most important global markets for trading in Gold. Demand for physical Gold has been increasing in Asia in the last couple of decades. India, China (especially Hong Kong) and Singapore have become major centres for Gold trading. The Middle-East region has also become a major centre for bullion trading. With Saudi Arabia, UAE, Turkey and Egypt contributing to over 16% of the global Gold jewelry demand, the Middle-East region is expected to contribute significantly to the growth in Gold consumption. Among major Gold consuming countries, Saudi Arabia has one of the largest per capita consumption (3.50 grams per capita) of Gold. Bahrain (situated in close proximity to Saudi Arabia) has evolved as an international financial centre for market participants to hedge against commodity price risk.
In this perspective, the BFX has launched the Gold futures contracts to facilitate market participants in the MENA region and other parts of the world to mitigate risk due to volatility of bullion prices. The BFX Gold futures are available for trading in the contract size of 32 troy ounces. The contract shall be quoted in US dollars and cents per troy ounce. The BFX Gold futures contracts would be aligned with the prices in the international reference markets, so as to provide a uniform price risk management strategy for market participants. The final settlement price is based on the equivalent futures contracts traded in the New York markets. The trading hours are aligned with the peak period (for active trading) in Asia, Europe and the US markets.
For more information on the BFX Gold Futures product booklet, please click here
For more information on the BFX Gold Futures contract specifications, please click here