Exchange Preps for Launch of Derivatives and Gold Bonds to Draw Retail Business

There is talk that the Shanghai Futures Exchange is also going to introduce trading in gold and silver futures, and that the two exchanges will work together on that objective. Moreover, the chairman of the SGE said on June 7 that it was studying several additional products for the exchange, such as gold bonds, gold ETFs, and precious metals index futures — a few weeks later, the local newspapers reported that the exchange was working with gold producers, securities firms and banks in preparation for the launch of the “gold bonds,” a derivative product “issued by gold mining firms and guaranteed by a certain amount of gold they produce within a certain period of time in the future. The interest rate of gold bonds is made up of a basic rate and a floating one. The latter is linked with the gold price of the date of maturity. The maturation of the bonds can be three years, five years, or 10 years” (China Daily).

There is little more information at this time, but the securities seem to contain elements of the niche business that is done by merchant bankers like Investec, Nedbank, and Macquarie, which offer project loan facilities to precious metal miners, which are covered by future gold production (sold forward).

If so, it is a cutting-edge financial innovation. It effectively securitizes a highly profitable business — at least during bull markets — making it widely accessible to the investing public…it is a coup that the newest gold exchange on the beat will be the first to have standardized and listed such a product.

Kudos!

Initiatives like this will draw liquidity to the exchange, whose membership recently added its first broker to the roster (which happens to be the one that co-developed this product), and which has increasingly enhanced its retail trading logistics to make it more inviting for the public to trade in gold. Indeed, until recently, the minimum transaction size was still too big for the retail public. But now, with the launch of the aforementioned products, the largest retail population in the world is about to have access to free trading in precious metals for the first time in centuries. Maybe it will go on a buying spree. At its current rate of growth, the SGE could rival Tokyo in less than five years, and the Comex in 10.
Although it may be another generation before it rivals the LBMA in size and scope, given the size of its prospective retail population and the progress of China’s gold market initiatives, the gold market could be on the verge of an enormous bullish shift in investment demand…possibly even official demand.

Will China start to buy more gold with it's enormous stockpile of US Dollars. Will the people start to buy gold to hoard for their future generations (which is in their longterm thinking process.
All of this is why I recomend gold and silver stocks now for accumulation.
GG - Goldcorp is my favorite.
CDE - has been a laggard but is still a buy.
AUY - is an up and coming company that has copper also.
SSRI - is a good one too.
PAAS - is good too.