An Empirical Study on Factors on Trading Demands of Gold Futures

This study examines what factors have the impact on the trading activity of gold futures contracts by investigating five out of actively trading markets among all twelve markets around the world. In the result of this research, the demand for speculation on gold is shown as an important and common factor to boost gold futures trades in a few markets. Trading activity increased not only with the increase of gold price but also with the decrease in a few exchanges especially before the financial crisis. The hedge demand for the depreciation of the dollar motivates investors is not observed in the markets we investigate. On the other hand, increasing volatility in stock market encourages the demand for the gold futures in COMEX before the financial crisis, which means that the demands for gold as a safety asset. Lastly, exchange rate risk has a negligible impact on trades.