Trade in gold and silver futures

They are the futures looking for a hedge against inflation, a speculative play, an alternative asset class or a commercial hedge, gold and silver may be the way you meet a feasible one. Trading this market involves considerable risks attached to and is not suitable for everyone and should only risk capital is used, as an investor could lose more than originally invested. In this article are the basics of gold and silver futures contracts andas they are traded.

That the precious metals futures contracts?

A precious metal futures contract is a legally binding agreement for the supply of gold or silver in the future at an agreed price. The contracts are standardized delivery of a futures exchange for quantity, quality, time and place. Only the price is variable.

Hedgers use these agreements as a way to price their risk of a purchase or sale of the expected managementingots. It also gives speculators the opportunity to participate in markets without physical support.

There are two positions you can take in the markets. A long position is a commitment to supply physical metal to accept, and one (sell) short position is the obligation to extradite. The vast majority of futures contracts are offset prior to delivery. For example, this occurs when an investor with a long position on, a short position in the same contract, eliminating the original position for long.

The advantages of futures contracts

Why exchange trading at the central level, the futures market offers greater leverage, flexibility and financial strength of trading the same goods

Leverage is the ability to trade and manage a product with high market value with a fraction of the total value. Trading> Futures contracts are made with the margin of performance. It requires significantly less capital than physical markets. The leverage allows speculators a higher risk / higher return on investment.

For example, gold futures contract for the controls to 100 ounces, or a brick of gold. The dollar value of this contract is 100 times the market price of an ounce of gold. If the market is trading at $ 600/ounce, the value of the contract is $ 60,000($ 600 x 100 ounces). On the basis of exchange margin rules, the margin necessary to control a contract only $ 4,050. So, for $ 4.050, you can control $ 60,000 worth of gold. As an investor, you are given the opportunity to use one, about $ 15 to $ check.

In futures markets, it is easy to start the same location, a short position in a long, participants received a lot of flexibility. This flexibility provides hedgers with the ability to protect their physical locationsand for speculators to take a position on the basis of market expectations.

Stock exchanges where silver / gold futures traded offer participants no counterparty risk, the clearing services provided by the. This means that the stock market as a buyer for every seller and vice versa seems to reduce the risks of each party should default on their responsibilities.

Contract Details

There are a few different gold contracts traded in the U.S.: aon the Comex and two on e-CBOT. This is a contract of 100 ounces, which is traded on both exchanges, and a mini contract (33.2 ounces) traded only on e-CBOT.

Silver also has two contracts trading on E-CBOT and COMEX. The contract for the "big" is 5,000 grams, which is traded on both exchanges, while the E-CBOT has a mini for 1,000 ounces.

Gold

Gold is traded in dollars and cents per ounce, for example, if gold is trading on600/ounce the contract is worth $ 60,000 (600 x 100 ounces), he added. A trader who is long and sold 600 to $ 610 1,000 (610-600 = $ 10 profit, 10 x 100 ounces = $ 1,000). In contrast, a merchant who has lost a lot of time and sold at 600 to 590 $ 1000.

The minimum price movement or tick size is $ 0.10. The market, a wide spectrum, but should move in increments of at least $ 0.10.

Both specify the e-CBOT and COMEX delivery to the New York area at a time. These times are subject Change of exchange.

The most active month on the stock market (depending on volume and open interest) are February, April, June, August, October and December.

To maintain an orderly market, the exchange of position limits. A location is the maximum number of contracts a single participant can hold. There are no limits at different positions for hedgers and speculators.

Silver

Gold Silver is traded in dollars and cents per ounce as. For example, if silver> Market $ 10/ounce, 'big' contract is valued at $ 50,000 (5000 oz x $ 10/ounce), while the mini) 10/ounce would be $ 10,000 (1000 oz $ x.

The tick size is $ 0.001 per ounce, $ 5 for large order and $ 1 for the mini-treaty. The market can not trade in smaller increments, but larger multiples of beings, as a few cents.

Like gold, the delivery requirements for both exchanges to give more time in New York.

The most active monthsfor delivery (volume and open interest) are March, May, July, September and December.

Silver like gold has limits set by the position of trade.

Hedgers and speculators

The primary function of a futures market, the future is a core market for those who have an interest in the purchase or sale of raw materials, at some time in the futures market helps hedgers metals reduce the risk associated withadverse price movements on the spot market. Examples of hedgers are bank vaults, mines, manufacturers and jewelers.

Hedger take a position on the market, which is the opposite of their physical location. With the correlation between futures price and the spot market to win in a market that will compensate the losses of others. For example, a jeweler who is terrible that pay higher prices for gold or silver would then buy a contract to lock in a guaranteed.If the market price for gold / silver goes up, they will pay higher prices for silver to gold. However, because the jewelry has a long position in futures markets, they could have / should have money in silver gold futures contract that increased costs for the purchase. If the cash price for gold / silver futures prices fell both hedgers lose their positions in futures, but pay less whenPurchase their gold / silver on the spot market.

Unlike hedgers, speculators have no interest in delivery, but try to profit from the adoption of market risk. Speculators) have private investors, hedge funds and CTA (Commodity Trading Advisor.

Speculators come in all shapes and sizes and can market to different time periods. Those who are often in and out of the market at a meeting called a scalper. A day trader has a position ofMore than a scalper, but usually not overnight. A trader holds positions for several sessions. All the speculators should be aware that when a market moves in the opposite direction, its position in losses.

Conclusion

Whether you are a speculator or a Hedger, remember that trading involves risks and is not suitable for everyone. Although there may be significant benefits for those involved in gold trading in futures andSilver, remember that the markets for futures trading best left to the dealer, who have the know-how needed to succeed.