Gold market price spillover between COMEX, LBMA and SGE
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Gold market price spillover between COMEX, LBMA and SGE Xinyi Qian1 Published online: 21 August 2020 © The Author(s) 2020
Abstract In this paper, the author investigates spillover between the main markets from New York, London and Shanghai. Specific contract prices from the Commodity Exchange Inc. (COMEX), London Bullion Market Association (LBMA) and Shanghai Gold Exchange (SGE) were utilized. Results suggest that even with the increasing market influence of SGE, it still remains an isolated market, COMEX and LBMA maintain their dominant positions and act as the net spillover spreaders in the world gold market with almost equally strong market impacts. Keywords Gold · Volatility · Spillover · COMEX · LBMA · SGE JEL Classification C58 · G14 · G15
1 Introduction 1.1 Background Gold is one of the most homogeneous goods in the world. Due to it’s fairly ideal preservation of value and easy storage, gold has been traded globally among exchanges and banks, both as a spot and/or future, as a commodity, and a financed asset. Three major gold trading centres are London, New York and Shanghai. CME Group (2017)
The author is grateful to Dr. Guanpin Lu for advice and suggestions, and to Jonas Klamka, Dr. Benjamin Sch¨afer and all other participants at the Uni-Siegen Doctoral Seminar for helpful comments. Special thanks shall be extended to Michael Wallace for correcting and proof-reading my paper. Xinyi Qian
[email protected] 1
University of Siegen,Faculty III, Unteres Schloss 3, Siegen, D-57072, Germany
Journal of Economics and Finance (2020) 44:810–831
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Established in 1933, Commodity Exchange Inc. (COMEX) is the oldest among the three markets studied in this research. COMEX merged with the New York Mercantile Exchange (NYMEX) in 1996 and then joined the CME Group in 2008. Being the division responsible for metals trading, COMEX is no longer a separate institution but a primary futures and options market for trading metals such as gold, silver, copper and aluminium. Established in 1987, London Bullion Market Association (LBMA) is a wholesale over-the-counter market for the trading of gold and silver. LBMA took over the London Gold Fix operates by the ICE Benchmark Administration (IBA) since 19. March 2015 and set the benchmark price twice daily (at 10:30 and 15:00 London BST) in US Dollars and is also available in a further sixteen currencies (indicative for settlements). The youngest market in this paper is the Shanghai Gold Exchange (SGE). Despite its short history (founded in 2002), SGE has already become the largest commodity exchange in the People’s Republic of China for trading in precious metals (gold, silver and platinum). Furthermore, the daily trading volume for gold and silver is at the second highest in the world and in 2017, exceeded the Shanghai Future Exchange (SHFE). 1.2 Motivation and research question Take a panoramic view of the overall situation of the global precious metal exchanges. COMEX is still first with respect to trading volume in gold and silver. SHFE and Tokyo Commodity Exchange
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