FinancialAdvisor's College Class (FACC)

[FinancialAdvisor]

Dubai opens first Mideast silver futures

Dubai opens first Mideast silver futures
Published: Wednesday, 29 March, 2006, 10:47 AM Doha Time

DUBAI: Dubai launched the Middle East’s first silver futures contracts yesterday, in the hope that growing investor demand for the metal will help power the Gulf emirate’s drive to become a global commodities trading hub.

The Dubai Metals and Commodities Exchange’s July delivery contract debuted at $10.95 per ounce as global silver prices eased off 22-year highs hit on expectations that a proposed US exchange-traded fund would spur demand.

Since the exchange opened in November, volumes in gold futures have increased rapidly, buoyed partly by the physical gold trade centred in Dubai.

Although the physical silver trade in the emirate is relatively small, traders said they expected silver futures volumes to grow even faster with rising demand from investors.

“Traditionally, silver has been more volatile than gold, which is great for people who want to move in and out of the market to make money. That will be the main driver of the growth in Dubai,” said V Sivaramakrishnan of KomBench.

More than 670 silver contracts had traded by 1200 GMT compared to 420 in gold. “Given the volatility in silver we were expecting this,” said Framroze Pochara, the exchange’s chief executive.

Hedge funds have been aggressively buying silver in the last two weeks as the US Securities and Exchange Commission paves the way for final approval of the first exchange-traded fund that tracks the metal’s price.

Silver hit $10.92 in New York trade on Monday, its highest since September 1983, and matched that in Europe yesterday before easing to $10.84/87 per ounce.

Analysts say an exchange-traded fund would enable players to invest in silver without taking delivery of the metal, attracting investor groups such as pension funds.

“The buzz about ETFs (exchange-traded funds), particularly in the West, is set to drive up investment,” said Jignesh Shah, vice chairman of the exchange. “This is a key part of our strategy.”

The exchange trades silver in 1,000-ounce lots and says it decided on smaller lots than the standard New York contracts of 5,000 ounces to meet demand from local merchants who hope to use the exchange for hedging.

The exchange’s 13-hour trading day, spanning the gap in business hours between Tokyo and London, encourages arbitrage plays.

While investor demand has helped drive silver prices up 20% in 2006, the physical market is expected to remain in deficit for the next two years as industrial and consumer demand outpace supply, estimated around 20,000 tonnes this year.

The exchange will launch the Middle East’s first currency futures this year and hopes to start trading euro-dollar, yen-dollar and sterling-dollar contracts in May. Other contracts in the works include steel and fuel oil futures. – Reuters


LINK: http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=79178&version=1&templa...