REFILE: CME Launches Gold-Silver Ratio and Spread Contracts

Monday October 24, 2016 10:37
(Kitco News) - Unprecedented investor demand for gold has driven ratios and spreads in the precious metals market to multi-year highs and the CME Group is hoping to capitalize on this new interest with three new futures product.
Wednesday evening, the futures exchanged announced that, pending regulatory approval, it will launch gold/silver ratio future contracts, gold/platinum spread futures and platinum/palladium spread futures. It is expected that these three new contracts will start trading Oct. 24.

"The introduction of these ratio and spread futures contracts respond directly to customer demand for new tools to more effectively manage the price relationships of our precious metals futures contracts, which are often used to manage portfolio risk," said Miguel Vias, CME Group Head of Precious Metals. "These three new futures contracts will eliminate a great deal of complexity involved in price ratio and spread trading of precious metals and provide a broader subset of market participants the tools to offset macroeconomic risk."

The CME said that the gold/silver ratio futures will be 500 index points and reference the rate between Comex gold and silver future prices for each day. The gold/platinum futures will trade in 100 troy ounces and reference the price difference between gold and NYMEX plantium future prices. The platinum/palladium will also trade in 100 troy ounces and reference the price difference between platinum and NYMEX palladium future prices for that day.

According to Kitco.com, the gold/silver ratio was last at 70. While the ratio is down about 13 points from its recent highs, it is still holding at its highest level in more than 5 years. Analysts have been bullish on silver because the ratio has spent most of the year trading well above historical averages, which is around 50.