The Thailand Futures Exchange (TFEX) is set to roll out e-Gold, the main feature of which is physical settlement, in August, after being pushed back from this month.
The product is a substitute for the planned spot gold exchange and to draw local gold dealers to trade the metal at home after several of them traded physical gold on Singapore's exchange.
Apart from physical settlement, the 99.99% pure e-Gold offers investors the option of cash settlement, said TFEX managing director Rinjai Chakornpipat, noting that it could be quoted in US dollars but settled in the local currency. The SET subsidiary will adopt up to T+2 settlement for e-Gold, she said.
"Now is a good time to launch the product as the price of gold is in an upward trend. Amid the global economic uncertainties and capital market volatility, investors are again turning to gold since it's regarded as a safe haven," said Ms Rinjai.
Rinjai: Gold seen as safe haven investment
TFEX will start promoting e-Gold by holding seminars and roadshows from next month, she said.
The main focus for the new product is market promotion and investor knowledge rather than trading volume, she said.
"Details of contract specifications and the process for trading and physical delivery will be announced next month," said Ms Rinjai.
At present, TFEX offers gold futures with two contract sizes -- 50-baht weight and 10-baht weight.
Gold futures have turned to an active product at TFEX after the recent price rally.
Paper gold was TFEX's third-most traded product with 12,000 contracts a day on average as of June 17, after SET50 Index Futures at 124,000 contracts and single stock futures at 78,000 contracts. TFEX's average trading volume is 210,790 contracts a day.
In the meantime, MTS Gold president Kritcharat Hirunyasiri said an e-Gold contract will contain one ounce of gold, but it will be converted into kilogrammes if investors want physical delivery.
"E-Gold is expected to be one of the most active products. I forecast that the number of trading contracts will be five to six times higher than that of gold futures, or 100,000 contracts per day," he said without providing a time frame.
The new product is expected to be popular among Thai investors and those from Cambodia, Laos, Myanmar and Vietnam as its features are similar to spot gold trading and its financial liquidity is quite high.
When it starts trading on TFEX, it could cause a decline in paper gold trading, as the new product has a smaller gold size and its settlement period is shorter, he said.
Brink's (Thailand) Ltd, a security transportation company, will provide delivery for the product, while six gold dealers will act as market makers to boost trading liquidity.