Bloomberg reports that CME Group Inc. is set to commence offering a one-ounce gold futures contract in January. This move comes in response to the soaring demand from retail investors during the bullion's record-breaking rally. The futures contract will be made available starting from January 13, subject to regulatory review. The Chicago-based exchange made this announcement on Thursday through a statement. CME's retail-friendly micro gold and micro silver futures, which are a fraction of the benchmark futures contracts, have been further enhanced with this new offering. These products have been among the fastest-growing metals offerings and have achieved record trading volumes this year.

Gold as a Popular Investment and Retail Interest Surge

Gold has long been a favored investment choice. In recent years, retail interest in gold has witnessed a significant upswing as more market participants recognize the importance of portfolio diversification. Jin Hennig, CME's global head of metals, emphasizes that one-ounce gold futures will open up more opportunities for a broader range of retail traders. The trend among retail investors to seek smaller-sized gold products as a means of diversifying their portfolios is on the rise, especially as spot gold has repeatedly hit new highs this year. The precious metal remains a reliable haven asset in times of economic and financial uncertainties.

Benefits of One-Ounce Gold Futures Contract

This new one-ounce gold futures contract offers several advantages. Firstly, it provides retail investors with a more accessible entry point into the gold market. With a smaller contract size, even those with limited funds can participate and gain exposure to gold. Secondly, it allows for greater flexibility in trading. Retail traders can adjust their positions more easily based on market conditions and their investment strategies. Moreover, it adds to the diversity of CME's metals offerings, catering to the evolving needs of retail investors. This contract enables them to build a more balanced portfolio by including gold as part of their investment mix.

Impact on the Gold Market and Retail Investors

The introduction of the one-ounce gold futures contract is likely to have a significant impact on the gold market. It is expected to attract more retail investors, further fueling the demand for gold. This increased demand can potentially lead to higher prices in the gold market, benefiting both existing and new investors. For retail investors, it offers a new tool for managing their portfolios and hedging against market risks. They can use this contract to speculate on the price movement of gold or to protect their existing gold holdings. Additionally, it provides a platform for retail traders to learn about and engage in the gold market, enhancing their financial literacy and investment skills.

In early European trading on Thursday, the pound was seen trading slightly higher against the dollar, reaching nearly 0.3% up to $1.2736. This occurrence followed investors' digestion of comments from central bankers in both the UK and the US. According to the Financial Times, Bank of England governor Andrew Bailey anticipated four interest rate cuts next year. In the US, Federal Reserve chair Jerome Powell stated in an interview on Wednesday that the "US economy is in very good shape and there's no reason for that not to continue." Powell did not hint at what the Fed might do regarding interest rates in its final policy meeting of the year later this month. Nevertheless, he did mention that due to the economy being stronger than the central bank had initially thought in the fall, "we can afford to be a little more cautious."

Deutsche Bank's Insights

Deutsche Bank Research's macro strategy team pointed out that US Treasury yields fell across the curve due to some weaker-than-expected data. In light of this, investors increased the likelihood of a December rate cut from the Fed. Futures took the probability up to a three-week high of 77.5% by the close. Meanwhile, sterling was flat against the euro (GBPEUR=X) on Thursday morning, trading at €1.2079. This came after the French government lost a no-confidence vote for the first time since 1962. In France's National Assembly, 331 votes out of 577 were in favor of ousting the government of Michel Barnier. The macro strategists at Deutsche Bank said, "The result was broadly expected, so it's little surprise that markets haven't seen much of a reaction. Indeed, since Marine Le Pen's announcement on Monday that her party would vote against the government, it was clear that the numbers were there to remove the government, so that was when the biggest market reaction took place."

Gold Prices and Economic Data

Gold prices dipped slightly lower on Thursday morning as investors weighed the latest comments from Powell along with economic data releases. Spot gold edged 0.3% lower to nearly $2,642.62 per ounce, while US gold futures were trading 0.2% lower at $2.669.70 per ounce. The November reading of the US Institute of Supply Management (ISM) services index on Wednesday was weaker than expected, with the headline figure of 52.1 falling below a consensus forecast of 55.7. The employment component of this measure of US services growth also dropped to 51.5. Additionally, the latest US private payroll figures from provider Automatic Data Processing (ADP) were weaker than expected at 146,000, compared to forecasts of 150,000. These readings precede Friday's US jobs report, a closely watched measure of the labor market. James Knightley, US chief international economist at Dutch banking group ING, said, "The Fed commentary this week has generally leaned dovish and if we do get a jobs report indicating roughly 100,000 of net job creation and the unemployment rate ticks up to 4.2%, as we expect, then a 25bp rate cut on 18 December looks probable."

Oil Prices and Middle East Conflict

Oil prices rose on Thursday as investors awaited a decision later in the day on what producer group OPEC+ will do regarding supply cuts. Brent crude futures climbed 0.2%, trading at $72.44 per barrel, while US West Texas Intermediate (WTI) (CL=F) climbed 0.2% to $68.70 per barrel at the time of writing. The Organisation of Petroleum Exporting Countries (OPEC) and its allies - collectively known as OPEC+ - is set to meet on Thursday to discuss its production policy for the first quarter of 2025. Many analysts expect OPEC+ to extend its current supply cuts through at least the end of March to support oil prices amid weaker-than-expected global demand. Investors were also closely monitoring the conflict in the Middle East. Israel's military actions in Lebanon continued despite a cease-fire agreement. Lebanese prime minister Najib Mikati confirmed on Tuesday that diplomatic efforts are underway to address Israeli violations of the truce, with hopes to secure Israel's withdrawal from border towns. However, Israeli defence minister Israel Katz warned that Israel would target Lebanese state infrastructure if the cease-fire collapsed, further fueling fears of regional instability.In broader market movements, the FTSE 100 (^FTSE) had a muted open, trading at 8,341.39 points. For more details, check our live coverage here.Download the Yahoo Finance app, available for Apple and Android.