Retail investors piled into CME Group Inc.’s micro gold futures contracts, and the precious metal’s price hit a new record.
According to data from the largest U.S. derivatives exchange, as of September 11, the average daily trading volume of micro gold futures contracts (an important indicator used to assess liquidity and activity levels) was 99,527 contracts, exceeding the trading volume for the whole of 2020, when it reached an all-time high of 86,101 contracts.
Investors have flocked to gold as more and more people expect the Federal Reserve to enter a rate-cutting cycle soon. Gold is also seen as a safe-haven asset amid ongoing geopolitical concerns such as the Middle East, the Russia-Ukraine conflict, and the upcoming U.S. presidential election. In addition, the need for global central banks to diversify away from the U.S. dollar reserve system has also helped boost gold prices.
The strong growth in micro gold futures comes as gold prices have hit record highs, rebounding more than 20% this year. Spot gold hit $2,560.13 an ounce on Thursday, a record high.
Retail demand “tends to be highly correlated with gold price movements,” especially when gold prices are on an uptrend, Jin Hennig, global head of metals at CME Group, said in an interview. “That started late last year and has continued into this year.”
The CME's micro gold futures contract was launched in October 2010 and is aimed at retail investors. It is one-tenth the size of the exchange's benchmark gold futures contract.
"We're heading towards a lower interest rate environment, so gold is becoming more attractive... I think we're probably going to have more frequent rate cuts rather than larger rate cuts," said Alex Ebkarian, chief operating officer of Allegiance Gold.
Gold tends to be a go-to investment when interest rates are low. "The job market continues to be weak, and if the job market deteriorates, the rate cut journey will last longer," said Phillip Streible, chief market strategist at Blue Line Futures.
The article is forwarded from: Jinshi Data
