SEC thumbs up for gold futures

Next-quarter investors will have gold futures as a new option for trading on the Thailand Futures Exchange, the country's derivative market for financial products.

The Securities and Exchange Commission yesterday approved issuance of financial instruments with gold as the underlying asset to add variety to the country's capital market.

The securities watchdog will discuss with the Finance Ministry and the Bank of Thailand about laws that might be an obstacle to the financial product's issuance.

"The SEC believes that gold is a commodity that people are familiar with and liquidity is high. Gold also has a low correlation with securities. Thus, financial instruments linked to gold can help investors diversify their risks," said SEC secretary-general Thirachai Phuvanat-naranubala.

Gold traders and jewellery businesses also want to use the financial instrument linked to gold as a hedging tool, he said.

According to a consultation with TFEX, the organisation is ready in terms of operations to start trading gold futures in the third quarter, he said.

Only SET50 Index Futures and SET50 Index Options are now traded on the TFEX.

Gold prices fell for the third day in Asia as the US dollar rose before a government report that will probably show no slowdown in US inflation. Gold usually moves in the opposite direction to the dollar as investors buy bullion as an alternative asset when the greenback is weak.

The Dollar Index, measured against six currencies, climbed for the second day before the US consumer-price index report, which may bolster the case for a halt in the US interest-rate cutting cycle.

Bullion fell on Tuesday as the dollar rallied 0.5 per cent on stronger-than-expected US April retail sales data, Darren Heathcote, head of trading at Investec Bank Ltd, said in a report.

The currency's rally makes "dollar-denominated commodities more expensive", he said.

Bullion for immediate delivery fell 0.4 per cent to $863.30 an ounce at 4:02pm in Singapore yesterday, after falling 1.8 per cent on Tuesday when the metal dropped to the lowest since May 5. Silver declined 0.7 per cent to $16.595 an ounce.

"In addition, technical chart weakness added to the selling pressure and all eyes are on for a possible break of the support at $845," Heathcote said.

The euro fell 0.4 per cent to $1.5416 at 4:04pm in Singapore from $1.5474 in New York late Tuesday. The dollar also climbed for the third day against the Japanese yen to ¥105.10 at the same time compared with ¥104.75 on Tuesday.

"The $890-$900 resistance proved to be too much for the bulls," William Kwan, chief dealer at Phillip Futures Pte, said yesterday. "Yesterday (Tuesday)'s decline below $870 could well see gold heading towards the $845-$850 supports again."

Gold for June delivery fell 0.7 per cent to $863.70 an ounce in after-hours electronic trading on Comex at 4:01pm Singapore time.

Gold for April 2009 delivery in Tokyo was unchanged at ¥2,942 a gram at 5:10pm local time. Gold for December delivery traded in Shanghai fell 1.3 per cent to close at 194.45 yuan a gram.