MORE investors in Shanghai are going after gold options as prices of the yellow metal fluctuate wildly, according to the Shanghai branch of Bank of China.

It disclosed that the trading value of gold options in the first eight months of the year has quadrupled that of the whole of last year to more than US$30 million.

"The wilder fluctuation in gold prices has been one main driver to boost option trading," said Xu Ming, a gold analyst at the Shanghai branch of Bank of China. "With prices more volatile this year, a daily fluctuation of US$20 is common, pushing investors to seek an investment tool to cope with the volatility."

Bank of China is the sole lender offering gold options to individual investors in the city.

Other banks including Industrial and Commercial Bank of China have started paper gold trading in the city where investors can cash in profits only when prices rise.

Options are financial instruments that convey the right, but not the obligation, to engage in a future transaction on some underlying assets.

Options have a leverage function to enable investors to bet with a limited capital. But its leverage function may also mean higher risk exposure when the investment fails.

Gold prices are expected to fluctuate between 160 yuan (US$23.36) a gram and 220 yuan this year with an average price forecast of 195 yuan a gram, according to Huang Yong, an analyst at GF Securities Co.