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Commodities

Trading on commodity exchanges surges in first half

Britain's vote to leave the European Union has sparked a flurry of gold trading.

TOKYO -- Six major international commodity exchanges saw trading volume jump 16% year on year during the first half of 2016, fueled by an inflow of funds to crude oil and safe-haven buying of gold.

About 887.19 million contracts changed hands during the first six months of the year, marking the fourth straight half to see year-on-year growth. The survey covered the New York Mercantile Exchange, the Chicago Board of Trade, the Intercontinental Exchange in the U.S. and Europe, the London Metal Exchange and the Tokyo Commodity Exchange.

Crude prices swung sharply during the first half. West Texas Intermediate futures on NYMEX fetched less than $27 per barrel back in February, a roughly 13-year low. Four months later, those futures topped $50.

Trading volume of WTI futures rose by 36% during the period. Volume of Brent crude futures on ICE, meanwhile, expanded 16%.

Because energy companies in the U.S. and elsewhere are cutting production, "funds are coming in due to anticipated spikes in crude oil prices," said Tsuyoshi Ueno, senior economist at the NLI Research Institute. Traders unwinding short positions also lifted trading volume.

The volume for gold futures increased 37% on NYMEX as the U.S. Federal Reserve opted not to hike interest rates. After British voters decided last month to leave the European Union, markets were rife with uncertainty, giving rise to a flurry of gold trading.

"Gold prices tend to climb as a rise in interest rates is delayed," said Naohiro Niimura, a partner at Tokyo-based research firm Market Risk Advisory.

Volumes for cereals and grains also picked up. Trading of CBOT corn futures rose 14% while soybean futures saw a 28% bounce. Poor harvests by South American producers and speculation surrounding weather patterns during the U.S. growing season spurred investor activity.

On the other hand, trading volume at the LME dipped 8% on the year. Because China consumes a large percentage of key nonferrous metals such as copper and aluminum, the Chinese economic slowdown apparently left a significant dent.  

Because of commodity prices' volatility, especially crude oil, this year is on pace to tally the highest volume since the survey began in 2011, likely exceeding 2015's record 1.52 billion contracts.

(Nikkei)

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