Rolling Gold Contracts

A Rolling Gold Contract is a standardized perpetual contract to sell and buy products with no intention for settlement or delivery. The aim of this transaction is to profit from the daily price and interest differential.

Since this contract can be rolled over perpetually, it serves as an ideal investment instrument for both long-term and short-term hedging. This type of transaction is especially unique because the underlying price is the Spot price instead of a Forward price, so it is not categorized as a Futures Contract.

The Rolling Gold Contract basically involves the translation of gold spot price in Loco London term (US$ per troy ounce) to gold spot price in Rupiah term (Rp per gram). By dividing the Loco London US$ per troy ounce price by 31.103, the price is translated into the gold price in US$ per gram. Subsequently, by multiplying the figure by the prevailing exchange rate of Rp/US$, the price of Rolling Gold contract is determined.

However, the recent switch to a free-floating currency exchange system increased the volatility of Rupiah and highlighted the need to hedging on US Dollar transactions. Thus, the Jakarta Futures Exchange created the Rolling Gold Index Contract to allow both hedging and profit making from Rp/US$ transactions.

The Rolling Gold Index Contract is actually a ratio of the Rolling Gold settlement price in Jakarta Futures Exchange to Loco London’s gold price in gram. By dividing the JFX’s Rolling Gold settlement price by the gold price in US$ per gram, the rate of Rp/US$ is established. Hence, the Rolling Gold Index Contract truly reveals the movement of the exchange rate of US$ and Rupiah.

Contract Specifications for Rolling Gold Contract: