By Wang Lan (China Daily)
Updated: 2008-01-10 09:01

Shi Min, president of Shandong Gold Group Co, said that the introduction of gold futures benefits numerous gold miners and processors in China by providing an effective tool to hedge against price fluctuations, especially at a time when the international gold market is showing increasing volatility arising from the weakening US dollar.

"The launch of gold futures is very timely," Shi said. "When gold prices are touching record high levels, gold producers are in much more need to hedge against high volatility resulting from sudden changes in market sentiment in these highly uncertain times."

Traders and industrial experts believe that the expected rise in gold output as well as consumption by China this year would help the newly established futures market gain influence in setting global prices in the foreseeable future.

Jeffrey Christian, president of CPM Group, a leading global commodities research and consulting company based in New York, told China Daily: "China will be the largest producer of gold from mines, a major refiner, and a major user in fabricated jewelry. It will also become a major investment market. It will gain influence on gold prices.

"Our expectation is that trading will start off relatively modestly in terms of volume, but could build later," said Christian.

"Chinese market participants should remember that when US and Japanese gold futures trading began, in the 1970s and 1980s, their volumes were initially low, but later they became major markets. The same could happen, and may well happen, with Chinese markets."

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