Gold Futures

Gold Futures 

Both in today’s modern world and historically, commodities have been basic building blocks of the economy. What are commodities? Keeping things simple, commodities are raw materials that are used for daily uses.

When commodity trading is mentioned, gold is one of the first things to come to mind. In the list of “soft commodities”, gold is the most popular precious metal to trade in today’s world.

This commodity’s low correlation with other commodities and its pricing related to flat currencies during the recent financial crisis are all building blocks to that a very important conclusion: gold is considered a currency in the Forex market and is traded in a similar way to other currency pairs. The difference however between other currencies and gold is that gold can only be traded in terms of USD.

 

Why Gold Futures

Gold futures are a great opportunity for hedgers to manage their risk of price changes on a purchase or sale of the precious metal.

In addition, due to the high frequency price fluctuations and liquidity of gold futures, speculators often find themselves in the business of gold futures trading.

One of the biggest advantages of trading gold futures is the high level of leverage that comes the contracts. With a higher level of leverage, speculators experience potentially higher return on investment with futures contracts.  

Moreover, greater transparency, financial integrity and flexibility are offered by futures contacts. This is due to the fact that they are all traded at centralized exchanges globally.

 

How does a gold futures contract work?

Gold futures contracts are standardized according to quality, quantity, and delivery location and time trough a futures exchange

 

The basics of gold futures trading include the two positions traders can take; long and short. A short position in futures contracts obligates the trader to deliver a specified amount of gold. And reversely, a long position is an obligation to received gold in the amount specified in the contract. However, the most common strategy for trading futures is when a trader sells the same contracts they had bought, or vice versa, before the expiry date of the contract. Speculators often use this strategy based on their speculations, and open short/long positions accordingly.

 

To trade gold futures successfully, PCM International offers not only the best futures trading platform, but also all the tools and information needed for educated and intelligent trading.

 

Gold futures

Symbol

Contract Size

Quality Specification

Trading Months

Last Trading Day

New Contract Listing

Price Quote

Tick Size

Price Movement Limit

Max Order Size

Trading Days

Trading Hours

Wholesale Trades

DG

32 troy ounces. (1 kg)

0.995 purity, as per Dubai Good Delivery Standard

Feb, Apr, Jun, Aug, Oct and Dec

Third last business day of the month preceding the Delivery Month

Business day immediately following last trading day

US$ per troy ounce

US$ 0.10 (US $ 3.2 per contract)

US$ 20 - Note 1*

200 contracts

Monday through to Friday

07:00 - 23:30 Hours Dubai time (GMT+4)

EFS, EFP, Block trade facilities available

Note 1*: If price breaches the daily price movement limit, trading in particular contract shall continue, with the new trading price range without any cooling period

Initial Margin based on SPAN

Calendar Spread Position Margin

Extra Margin

Delivery Period Margin

$1.400 per contract

Depending upon each class of asset, spread position margin (Calendar spread margin) is charged using the SPAN framework. In case of Gold, 100% benefit is offered on calendar spread margins.

In time of high volatility, an extra margin as deemed fit by the Exchange may be imposed on all open positions

Five (5) times of the Initial Margins

Delivery Unit

Deliverable Weight

Deliverable Quality

Approved CMI / Assayers

Approved Refiners

Approved Vaults

Delivery Period

Notice Day

Delivery Process

Vault charges

Delivery Instrument

Option for Cash Settlement

1 Kg (31.99 troy ounces)

1 Kilogram cast in one bar

In time of high volatility, an extra margin as deemed fit by the Exchange may be imposed on all open positions

0.995 fineness

Names as listed on the DGCX website

Names as listed on the DGCX website

Names as listed on the DGCX website

First Day of the Delivery Month

The Matching of Buyers and Sellers for Gold delivery will be completed on a time priority basis upon receipt of their Tender/ Delivery Notices

Rates applicable as published on the DGCX website

Dubai Gold Receipt (i.e. Standard DGR along with validated Refiner's certificate or CMI-Certified DGR only)

Open Positions that have not been closed out on the Last Day of Trading are subject to cash settlement as per gold cash settlement price declared by the Exchange