What are gold futures?
Gold futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of gold at a predetermined price on a future delivery date. Gold futures give companies involved in the precious metals industry a way to hedge their gold price risk on an expected future purchase or sale of gold. They also allow investors to participate in an easy and convenient alternative to traditional means of investing in gold. Gold can be considered the ultimate store of value. Buying gold futures contracts as an anti-inflation hedge may be their primary use. The liquidity of the gold futures contract often makes it easier to take advantage of opportunities in nearly all market conditions.
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Gold futures are traded at the COMEX division of the New York Mercantile Exchange (NYMEX). The standard contract size is 100 troy ounces, with two additional smaller contracts at 50 and 10 troy ounces. The exchange specifies the delivery of gold to New York area vaults and are subject to change by the exchange. An account approved to trade futures is required in order to trade gold futures.
Gold futures contract specifications
Considering trading gold futures? Here are the gold futures contract specifications.
|Contract Size||100 troy ounces|
|Minimum Tick Size and Value||0.10, worth $10.00 per contract.|
|Trading Times||Gold futures trade from 6:00 p.m. U.S. ET until 5:00 p.m. U.S. ET, Sunday through Friday, with a 60-minute break each day beginning at 5:00 p.m. U.S. ET.|
|Principal Trading Months||Primary gold futures contracts are February, April, June, August, October, and December.|
At Schwab, you also get access to advanced trading platforms and education, where you can take advantage of market research, real-time gold futures quotes, and other specialized tools.
Gold futures contracts can be used for either hedging or speculation. Companies that rely on gold as materials for manufacturing or resale (jewelry) can trade them to lock-in a future price for the precious metal. Similarly, speculative investors and traders can use gold futures as a way to participate in the markets without any physical backing of the material and to express investor sentiment on the future price of gold.
It is important to understand the benefits and risks involved with gold futures before placing a futures trade. Compared to traditional investments, with gold futures you can trade nearly 24 hours a day during the trading week and take advantage of trading opportunities regardless of market direction. Gold futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like gold futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
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