One reason GOLD is up?

http://news.xinhuanet.com/english/2008-01/09/content_7389678.htm
China's gold futures jump to daily limit upon debut


by Xinhua writer Wu Qiong

BEIJING, Jan. 9 (Xinhua) -- With world bullion prices hitting new highs, gold futures made a strong debut on the Shanghai Futures Exchange (SFE) on Wednesday. The contract offers China a chance to become a key player in the global gold market. It could also be a hedging tool for gold producers and a means to absorb excess liquidity, analysts said.

The key contract for June delivery was the first to take off, surging 9.98 percent to 230.95 yuan (about 31.65 U.S. dollars) per gram. This was followed by the daily limit rise of other contracts for July-to-December delivery.

Seven contracts were traded, with the benchmark price set at 209.99 yuan per gram by the SFE a day earlier, lower than world prices.

The contract size was set at 1,000 grams, larger than the originally expected 300 grams, to discourage individual investors who lacked the ability to handle the risk.

Analysts said they believed investors would need at least 24,000 yuan to secure a futures contract, as most futures brokers would ask for a 12 percent cash deposit for each contract.

The most active June contract closed the first trading day at 223.3 yuan per gram, up 6.34 percent, with a turnover of 23.2 billion yuan, according to the SFE website. The total turnover of the seven contracts was registered at more than 27 billion yuan for the day.

All futures contracts finished the day higher, between 223 yuan and 228 yuan, slipping slightly after peaking at 230.99 yuan.

China gold futures trading was launched as international gold prices have repeatedly hit new highs. Global prices jumped more than 30 percent last year, the biggest increase since 1979.

Gold prices climbed more than 2 percent on Tuesday against strong oil prices and a weakening U.S. currency. A troy ounce of gold for February delivery added 18.3 U.S. dollars to settle at 880.30 U.S. dollars on the New York Mercantile Exchange (NYMEX).

Last month, the China Securities Regulatory Commission (CSRC) approved the launch of gold futures trading. It was the fifth new futures product approved last year after zinc, rapeseed oil, polyethylene and palm oil.

The SFE, one of China's major futures trading venues, previously traded copper, aluminum, zinc, natural rubber and fuel futures.

Some analysts said that gold futures could provide experience for the long-awaited launch of stock index futures.

Live pig futures will also be launched to help stabilize pork prices.