During the post-crisis recovery in 2009, many professional investors placed their bets on Gold and Silver among all commodity class. Dollar receded rapidly over the new decade of 2010 era while bludgeoned by the Quantitative Easing (QE) polices introduced by the Obama administration. Practically, the Spot Gold prices climbed from USD680 /oz to the all-time-high USD1920 /oz amid the roll out of QE series while Silver escalated from USD9.00 /oz to USD50.00 /oz. By linear calculation, the yellow metal rose 182 percent compared to the latter entity that gained 455 percent. Comparing to the precious metals, WTI Crude also gained 228 percent after recovering from USD35 /barrel during the subprime-crisis to USD115 /barrel in Y2011. The market fundamental has shown that flatten Dollar will become a strong catalyst to push up the commodity prices due to a quick hyper-inflation.

In today’s world, we are facing a strong dented global economy from the impact of pandemic crisis in addition to the rising sovereign debt in many Euro-American countries. Till date, the Federal Reserve has a balance sheet of USD7 Trillion that has no dateline to be trimmed. Furthermore, the U.S. election in 2020 still entangles with a squabble between the two parties on rolling out another USD2.2 Trillion stimulus aid. In other words, the printing of Dollar bills has lost its grip on economic recovery other than “manifesting” more fiat money from the thin air to propel the American economy. Hence, Federal Reserve chair Powell has committed to keeping rates at very low level near to zero for a very long time before the recovery kicks in!

The true question is here: Can U.S. economy really recover once the balance sheet increases to more than USD10 trillion in addition to the external debt already crossing the 100 percent of GDP now? Besides the point, China is rising fast and also known to be the first country in Asia to lead the recovery out of covid-19 crisis in 2020. With more hot cash and global capital rushing into China and Hong Kong markets for higher yield, can U.S. succeed in attracting funds back to the American market when some economists predict the FED fund rate might dive to below zero level in another 18 months?

With this observation on the current macro economics over U.S., China, Eurozone, U.K. and Asia markets, it will not be a surprise to see another meltdown in Dollar will soon erupt in 2021. This is highly possible in the post U.S. election and the global situation continues to erode from the impact of coronavirus spread.

Recently, the greatest American investor Warren Buffet has invested into the five major commodity firms in Japan, namely Sumitomo, Mitsui, Itochu, Marubeni and Mitsubishi. The common businesses of these 5 profitable firms are based largely on commodity trading covering edible food, edible oil, grains, building materials, minerals, metal mining etc. Theoretically, we could deduce that Buffet foresees a possible deep fall in Dollar over the next few years that will trigger a “craziness” in commodity bullish prices! In other words, the replay of economic situation from 2010 – 2014 will return soon after we move into the new decade of 2020s.

Thailand Futures Exchange has taken a bold step among other Exchanges in Asia region. The fierce competition among all the Exchanges is largely based on the spectrum of well-received derivative products or a unique identity of product that no other Exchanges could compete for a long time. As far as the financial derivative industry was born in Asia for more than three decades, every Exchange is focusing intensively on developing a powerful derivatives product for attracting regional investors, which also indicates the late starter in the rest of Asia may face tougher challenges for competing with the established Exchanges.

TFEX has definitely exercised its wisdom by creating the Quanto-product by introducing the Gold Online Futures (symbol: GO) that commenced trading from November 2018. Till date, we know that CME COMEX market is one of the largest markets, may be the largest in fact, in Gold trading activities around the world. The average daily volume revolves around 200,000 contracts and operates almost around the clock via electronic trading.

By mapping the exact specification of the CME COMEX Gold Futures (symbol: GC), there have been numerous arbitrage opportunities since the TFEX GO Futures launched. With a difference in the trading volume and market participation among the two Exchanges, the rate of speed in market movements would become a daily bread and butter for scalpers that go for quick speculation of price changes. Hence, the volume in TFEX has grown tremendously since the GO was launched.

In each era of the bull-run in precious metals, the Silver has proven to be a “quicksilver-lightning” in price ascension than the yellow metal. Therefore, it will be a great delight to know that the TFEX will be launching the new Silver Online Futures (symbol: SLV) sometime in Q4 season in 2020. This is another Quanto-product to the CME COMEX Silver Futures (symbol: SI) that is very well received as the side-runner to Gold Futures market. With these two Quanto-products trading in TFEX market, they will serve well to quench the thirst of many market traders as well as bona-fide hedgers for diversion of price risk!

Perhaps, the eventual roll out of GO and SLV Futures in TFEX may become the most popular markets in Gold and Silver derivatives among South East Asia when TFEX creates more exposure in the region. Trading in Dollar and settle in Thai Baht will become an epitomized theme for many local traders and this might become a trend for many foreign Exchanges in future!

With a low cost in trading commission but “playing” in such a highly viable and potential market, there is not much reason for the experienced traders and traders-wanna-be to resist the TFEX market. Moreover, the trading hours have covered well to satisfy the needs of local Thailand who wish to participate almost round-the-clock. While most people love to explore and plan to enter into a highly liquid and volatile market with such easily controlled risk management, the TFEX market is right here at your doorstep today!

 

Authored by DAR Wong

DAR Wong is a market veteran and professional from Singapore. He has exposure from international securities and derivatives for more than three decades. The expression is solely at his own.  He can be reached at dar@alaa.sg