Rolling Gold Index Description

 

 

THE ROLLING GOLD INDEX CONTRACT

 

KIE is a rolling gold contract, which is an index comparison between the settlement price of rolling gold contract at BBJ and the price of Loco London per gram. This Index Number is 100% similar to US Dollar currency exchange rate movement towards Rupiah currency.

 

Application:

Buying position in KIE (long position) means buying USD and selling Indonesian Rupiah (exchange Rupiah currency to get USD currency).

Selling position in KIE (short position) means selling USD and buying Indonesian Rupiah (exchange USD currency to get Rupiah currency).

KIE is a rolling contract, where an offered price is a spot price that does not yet calculate the interest rate factor so that the interest rate calculation is done for settlement price and the market position (long and short position). 

There is a given different level of interest rate between Indonesian Rupiah and USD, so the consequences of related conditions are the presence of paying and accepting calculation from that difference interest. If the interest rate level of USD is lower than Indonesian Rupiah, the investor with the buying position has to pay that difference interest.  On the contrary, the investor with the selling position will get that difference interest.

Rolling Contract is a standard agreement between the parties in which the parties do not have to know one another to buy or sell a certain product with a certain price without any purpose to close it, but for the purpose to prolong it by calculating a price change and a difference of interest rate on a daily basis. Rolling Contract is a special futures contract because the traded price is a spot price, not a forward price. Rolling Contract also has no maturity date. Rolling Contract can be extended without any time limit so that it can be used easily both for long time and short time hedging. Rolling Contract transaction is done in (BBJ) and guaranteed by PT. Kliring Berjangka Indonesia (KBI). This guarantee is given to ascertain there is no party which will suffer financial loss, if one of the dealing parties fails to fulfill their obligation.

 

Advantages of KIE Transaction:

-          Trading KIE transaction  only needs 5 – 10% from the total investment value. It does not need fund up to 100% from the total investment value.

-          Trading KIE transaction can be used as an hedging instrument for short time and long time period. 

 

Fundamental Analysis Base In Brief

As earlier elaborated above that Rolling Gold Contract (KIE) is equivalent to foreign exchange of exchange rate level of USD – Indonesian Rupiah (USD/IDR), so that market product analysis of KIE is foreign exchange analysis of US Dollar – Indonesian Rupiah.

Several factors influence the movement of exchange rate USD and Rupiah currencies are described bellow : 

-          Local factors : Inflation, Export-Import, Interest Rate, IHSG, Investment, Monetary Fiscal Policies, Politic-Social-Security Conditions, etc.

-          External factors : Oil Price, Fundamental Global Economy, Fundamental Regional Economy, Global Share Price Trend, Regional Share Price Trend, Regional Currency Sentiment, Country Risk, Geopolitics (Political tension), Etc.