The Shanghai Futures Exchange (SFE), one of China's major futures trading venues, started gold futures trading on Jan. 9, 2008. The contract size will be set at 1,000 grams, in order to discourage individual investors.

The contract size was decided based on surveys. It is large enough to discourage those individual investors who lacked the ability to take risks, while also being useful to institutions.

"We started gold futures trading to provide channels for gold producers and individual investors to hedge against price fluctuations," said the official of the SFE.

The launch of gold futures would add to the hedging options for gold producers against the fluctuating global market.

The SFE imposes strict risk controls on gold futures. It would set a minimum margin requirement of 7 percent of the contract value and a daily price movement band, within the range of plus or minus 5 percent of the previous settlement prices.

Gold was the second new futures product to be introduced in China this year. The first was zinc, which launched trading in March.

In 2006, China produced a record 240 tons of gold, up 7.15 percent year-on-year. In the first nine months of 2007, it produced 191.456 tons of gold, up 13.1 percent from the same period last year.