earticle

영어

The standard gold futures listed in 1999 in the Korean market appears unsuccessful because of its intermittent trade pattern. Nonetheless, Korea Exchange listed mini gold futures in September 2010. We first examine what leads investors to trade gold futures as well as what obstructs trade. We observe that high tax rate on gold trades in the Korean market make investors hesitate in trading gold in a legal market, and almost 50% of total traded gold is illicit. Therefore, the standard gold futures that deliver physical gold at a maturity date is not attractive to investors. Trades of the gold futures, however, sharply increase when the demand for importing gold increases, when the exchange-rate or political risk becomes heightened, and when the Korean stock market destabilizes. In contrast to our expectation, changes in gold prices seem not to stimulate trade of the gold futures. After figuring out the obstruction and cause of demand, we investigate whether the gold futures in the Korean market can meet this demand. In the results, the trading strategy designed for hedging or speculating exchange-rate and political risks produce significant positive returns. In addition, we show that efficient frontier can be significantly improved by including the gold futures into a portfolio with Korean stocks and bonds. Efficient frontier is much more improved when the gold futures is included than when S&P 500 index is added in a portfolio.