Spot Loco-London Market

Spot Loco-London market is a round-the-clock market where you can buy or sell Gold, Silver & Mini-sized Gold through Phillip Futures.

Loco-London Gold are quoted and traded in minimum price multiples of US$0.05 a troy ounce. Each US$0.05 price move is equivalent to US$5 per 100 oz contract. So if an investor bought 1 lot of Loco London gold at US$630.00 and sold it later at US$640.00, the result = US$640.00 – US$630.00 = US$10.00 x 100 ounces = profit of US$1,000.00.

When trading, the buyer and seller only need to place a fraction of less than 10% of the contract value as margin deposit instead of paying the full value of the contract traded. As the full value of the contract transacted is not exchanged between the buyer and seller, the buyer therefore will be debited daily interest charges on the value of the contract while the seller will be credited daily interest earnings. This interest adjustment is necessary as there is usually a differential between the gold lease rate (lower) and the US$ interest rate (higher). Hence, if you sell Loco-London Gold, you will receive interest and if you buy there will be interest payable.

Spot Loco-London market is an over-the-counter market (OTC) which buyers and sellers trade on the spot price. You may hold your positions as long as you like as there are no expirations date. However, no market book (bids, offers and quantities) are available as this is an OTC market.

As margin trading is based on leverage which means that buyer and seller only need to place a fraction of less than 10% of the full contract value as an Initial Margin deposit, a bullion interest will be computed on a daily basis based on your full contract value on the value date (T + 2) of your transaction date.

Currently the Bullion Interests per annum are as follows:-

Illustration 1: If you are in a long position

Buy 1 lot of Spot Gold @ $953

Buy on 3 Mar 2008, Value dated (T + 2) at 5 Mar 2008

Sell on 10 Mar 2008, Value dated (T + 2) at 12 Mar 2008

Total no. of holding days is 7 days.

$953 x 100 oz x 4.75% x 7/360 days = $88.02 payable

If you have bought 1 contract of Mini Gold, the interest payable is calculated in the following way:

$953 x 32.148 oz x 4.75% x 7/360 days = $28.30 payable

Illustration 2: if you are in a short position

Sell 1 lot of Spot Gold @ $953

Sell on 3 Mar 2008, Value dated (T + 2) at 5 Mar 2008

Buy on 10 Mar 2008, Value dated (T + 2) at 12 Mar 2008

Total no. of holding days is 7 days.

$953 x 100 oz x 1.25% x 7/360 days = $23.16 receivable

If you have sold 1 contract of Mini Gold, the interest receivable is calculated in the following way:

$953 x 32.148 oz x 1.25% x 7/360 days = $7.45 receivable

So, if you short the market, not only do you enjoy the power of leverage, you will also be earning an interest of 1.25% per annum on your holdings!

For Your Precious Metals Investment Needs, Please Contact Our Precious Metals Specialists At:

Tel          :               (65) 6536 7113
Fax         :               (65) 6538 2190

Email      :               bullion@phillip.com.sg