CME Group Launches New Gold Futures Contract Amid Liquidity Squeeze

As brokers and Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term providers struggle with a liquidity squeeze on gold, CME Group announced on Tuesday that it would launch a new gold futures contract to give traders increased flexibility.

Specifically, the new contract has expanded delivery options and includes 100-troy ounce, 400-troy ounce, and 1-kilo gold bars. The contract is expected to launch with a first expiration of April 2020, the derivatives exchange said, pending regulatory approval.

Commenting on the new product, Derek Sammann, Senior Managing Director and Global Head of Commodity and Options Products, CME Group said in the statement: "This time of unprecedented market conditions has led to growing demand for a broader range of delivery needs for our clients worldwide."

"By offering a choice of delivery sizes as well as inter-commodity spreads with our benchmark gold futures, this new contract will provide customers with maximum flexibility in managing physical delivery."

CME Group is yet to announce the specific launch date, with the company planning on clarifying this later in the week. However, the exchange did reveal that the new futures contract will be available for trading on CME Globex.

The contract is also available for submission for clearing via CME ClearPort, and it will be subject to the rules and regulations of COMEX.

Gold liquidity squeeze amid COVID-19

CME Group's announcement comes as demand is far outweighing supply for the commodity. In fact, Liquidity Providers Liquidity Providers A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi A liquidity provider (LP) constitutes either individual and/or institution that functions as a market maker in a given asset class. Broadly speaking, liquidity providers will act as the both the buyer and seller of a particular asset, thus making a market. In the equities space, many stock exchanges rely on liquidity providers who make the commitment to provide liquidity in a given equity. These liquidity providers commit to providing liquidity in the hopes that they will be able to make a profi Read this Term have been struggling to price gold, leading to increased spreads. Brokers, such as Alpari, have switched all XAU and XAG symbol to "Close-Only" mode until further notice.

As reported by the Financial Times on Tuesday, traders have signaled a growing shortage of gold bars, as the coronavirus pandemic has caused an increase in demand while at the same time, has disrupted supply, "with one business comparing the frenzied buying of the yellow metal with the consumer rush for toilet roll."