Free market competition in commodities market
After recent correction in the silver market many commentators have spoken out about possibility of price manipulation by the CME (owner of the COMEX). Since there is no proof of such manipulation therefore I will assume there wasn’t any but many market participants may have different opinion on the subject.
However, any long-lasting manipulation is only possible in a monopoly and since free market does not favor monopolies, so it was only a matter of time before a competitor for COMEX arise. At this time the only practical place for a new commodity exchange is in Asia and on May 18 Hong Kong Mercantile exchange will finally offer an alternative to the COMEX[i].
The Hong Kong Mercantile Exchange (HKMEx) will offer 1-kilo Gold futures contract priced in US dollars and available for physical delivery in Hong Kong. HKMEx trading will be open from 0800 HKT to 2300 HKT (1 AM GMT+1 to 4 PM GMT+1) with opening auction starting at 0730 HKT.
This will enable Asian traders to execute trades parallel to TOCOM in Japan, COMEX and London Bullion Market Association AM and PM Fixings. HKMEx is using its state-of-the-art electronic platform to trade commodities and there is a growing need to set up a regional benchmark contract for gold pricing. This would help with better price discovery for the Asian gold market since USA market is becoming less and less reliable.
Opening a new competitive exchange for commodities in Kong Kong is a very important step for rapidly developing Asian market and yet another sign that the center of trade is moving from USA and Europe to Asia.