Volatile prices limit Dubai gold futures growth

Volatile prices have affected Dubai Gold and Commodities Exchange but volumes are set to surge with some stability in the market and as more trading members becoming active, the head of the exchange said.
"It's very good to have gold on the front page of the papers, but it could also have a negative affect," Colin Griffith, chairman of the exchange told Reuters on Tuesday.
"Because the markets have been moving so quickly, that has deterred a number of players from operating," he said on the sidelines of a conference organised by the London Bullion Market Association.
Gold surged 24 percent in a month to a 26-year high of $730 an ounce on May 12, but fell by 26 percent in the next month to $543.
The exchange, which started operations about six months ago, would have recorded higher volumes if the market was less volatile, Griffith said.
He saw daily gold volumes surging to more than 10,000 contracts after a year from about 3,000 contracts now. Total volumes, including other commodities, were expected to rise to 20,000 contracts from 5,000-6,000.
The exchange has launched five futures contracts, dealing in gold, silver and currencies. It plans to introduce steel futures in September or October and is working on other agricultural commodities such as sugar and cotton.
It has 180 members, of which nearly half are active.
"A lot of them are still in the process of establishing their business in Dubai or surrounding markets and some have come from other areas," he said.
"If you turn the clock forward six or nine months, then they all are going to be up and trading. And we will have more products on board...we will see volumes go even higher."
He saw flat gold imports into Dubai in 2006.
Dubai imported 522 tonnes of gold in 2005, but fell by eight percent in the first quarter of this year from the corresponding period of last year, Griffith said. "By the year end, unless prices go very high, there will probably be about the same level of imports as last year. But in monetary terms, it will be considerably more than last year.
Scrap supply had risen and physical buyers would step up gold purchases after prices stabilised, he said.