Intercontinental Exchange Inc. has launched new gold futures contracts in London, continuing its efforts to expand trading in a market built on over-the-counter deals and controlled by a few major global banks. This week, the U.S. exchange operator began offering daily futures for 100 ounces of gold, aligning the contracts with the large-format bars that underpin spot trading in London. Daily futures for silver, platinum, and palladium have also been launched.
The world's largest precious metals market remains in the hands of a small network of banks and brokers trading spot contracts and over-the-counter forwards, while exchange-traded gold futures have long been established in New York and Shanghai. JPMorgan Chase & Co. and HSBC Holdings Plc are two dominant players on the London market. This system has been criticized for its relative opacity and high barriers to entry, but creating a competing futures platform has proven difficult in the past.
The London Metal Exchange took a step in this direction in 2017 by launching gold contracts with the support of major dealers, including Goldman Sachs Group Inc. and Societe Generale SA. However, after an initial surge in activity, trading volumes steadily declined, and the contracts were discontinued in 2022. ICE, which already conducts daily auctions setting the benchmark gold prices in London, launched related futures contracts in 2016, and CME Group Inc. in 2020 created a contract to support trading of 100-ounce bars popular with large institutions and investors. Both contracts failed to gain traction.
This material is prepared solely for informational purposes and does not constitute financial advice or a recommendation.
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