Gold Volumes Lose their Shine at TOCOM, July Activity Drops 12.8%

Commodities, an asset class that investors use in difficult times as a hedge against inflation have been witnessing a gradual decline in value and activity. Tokyo’s main commodity bourse has seen a drop in trading metrics as investors stay shy of declining prices in major commodities. Its most liquid contract, TOCOM Gold traded 47,716 contracts in July, a decrease of 12.8% from 54,721 traded in June. The downward trend was seen in the most active contracts which included; Platinum, down 24.4% to 15,100 contracts; and Crude Oil, which was down 22.8% to 3,507 contracts.

Although volumes were down, the Exchange saw an uptake in active contracts, open interest at the end of July for all listed products totaled 298,382 contracts, an increase of 8,208 contracts (2.75%) from the previous month.

The slowdown in activity can be attributed to various factors, most notably; Current Employment Statistics, USDA World Agricultural Supply and Demand Estimates Report as well as FOMC meetings. In a statement made by the exchange, it said that during the announcement of this economic data volumes at “TOCOM tends to be subdued in such situations."

Regulations in Europe and the United States along with M&A activity have been keeping the exchange sector in the limelight. Since the global recession of 2008, Asia saw a proliferation of new venues, in particular a high uptake in commodity trading venues.

Keiko Koyama of the Tokyo Commodity Exchange attributes these changes to the new opportunities Asia offers, he said in a comment to Forex Magnates: “Asian investors require markets to invest locally, and the global market participants require new markets to trade in. For the latter, new and tougher regulatory environment in the U.S. and Europe is said to have contributed to the growing presence of Asian marketplace. With regard to the commodities trading, in particular, it is natural for advancing economies require market with price discovery functions.”