Trading Gold Futures
by InvestingTips on Oct 31, 2012
- 419 views
Trading Gold Futures
If you doubt that currencies will maintain their value you may want to buy gold.
If you want to make money on the fluctuations in gold prices, trading gold futures may be a better route.
Trading gold futures and options on the same can be done through CME group.
Gold futures are used for hedging by commercial producers and buyers of gold.
Trading gold futures also sets a worldwide price for the commodity.
For those who distrust fiat currencies gold is an investment.
Trading gold futures can be profitable for those who do the necessary fundamental and technical analysis.
Because gold prices vary with economic and political changes the commodity can be quite volatile which in turn can lead to substantial profits.
Trading gold futures gives the trader a degree of leverage not seen when buying gold bullion.
Trading gold futures options is a way of hedging investment risk in this market.
Short Term Profits Versus Taking Delivery
The minimum contract size for trading gold futures on CME Globex is 100 troy ounces.
One can buy one contract and simply take delivery when the contract expires.
However, many traders simply exit their futures contract by making the opposite trade at some profitable time before the end of the contract.
Whereas gold buyers trading gold futures want to lock in a price for their product, speculators are simply interested in making a cash profit from their trading.
Gold futures trading on CME Globex and CME ClearPort takes place from Sunday to Friday around the clock with a 45 minute break from 5:15 pm to 6 pm New York time.
There is an open outcry market in New York from Monday to Friday from 8:20 am to 1:30 pm local time.
The minimum price fluctuation is ten cents an ounce. Contacts are available with expiration dates a far out as six years.
The gold bullion traded for futures contracts must be of at least 995 fineness.
Although there are many way of trading gold, the futures route with options can be, for many, the best way to profits with controlled risk.
Making a Profit Trading Gold Futures
When the United States went off the gold standard fifty years ago, gold prices started to rise.
They quickly went from the set price of $32 an ounce to $100 an ounce to over $600 an ounce over the next decade which was wracked by inflation.
Then gold prices fell precipitously to the $200 range where they stayed for twenty years. In 2000 gold started back up and now trades around $1,700 an ounce.
If one had purchased gold bullion in 2000 and put his gold in a safe deposit box he would have profited more than eight fold.
However, if he had accurately anticipated the peaks and valleys in the rise of gold he would have profited substantially more by purchasing calls and puts on gold futures.
To avoid excessive risk many trading gold futures purchases options.
- Total Views
- Views on SlideShare
- Embed Views