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 everyday for daily uses.
When commodity trading is mentioned, gold is one of the first things to come to mind. In the list of “hard 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.
|Contract Size||32 troy ounces. (1 kg)|
|Quality Specification||0.995 purity, as per Dubai Gold Delivery Standard|
|Price Quote||US$ per troy ounce|
|Tick Size||US$ 0.10 (US $ 3.2 per contract)|
|Daily Price Movement Limit||No Price Limit|
|Max Order Size||200 lots|
|Trading Days||Monday to Friday|
|Trading Hours||07:00 - 20:00 Hours UAE time (GMT+4)|
|Automatic Rollover Mechanism||On any given trading day, unless a notice of delivery intent has been recieved by DCCC prior to 20:15 Hours UAE time, all open positions will be marked to market and automatically carried forward into the next trading session. For all carried forward positions a rollover fee will be applied.|
|Initial Margin based on SPAN||$ 1,400 per contract|
|Delivery Notice||Before 20:15 Hours UAE time (GMT+4) on trading day.|
|Delivery Margin||5 times the Initial Margin, subject to change.|