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The Basics of Trading Metal Commodities

May 17, 2018 by Daniels Trading| Futures 101

Metal commodities offer market participants a wealth of trading options. From hedging financial risk to securing the materials necessary for manufacturing, metal futures can satisfy a wide variety of needs.

An array of live futures contracts for precious and base metals are offered by the CME Group. Gold, copper, and silver are the most popular in terms of daily traded volumes. Platinum, aluminium, steel, and even uranium are less-frequently traded exotic offerings. Whether a trader is diversifying a portfolio or limiting production risk, buying or selling a futures contract related to metals can be an ideal method of achieving any number of objectives.

Gold

Around the globe, gold is synonymous with value. It has served as a mode of exchange for more than 2,000 years, with origins dating to 550 B.C. In modern times, gold has been used as backing for various international currencies, including the U.S. dollar.

Gold plays an important role in the world of finance because it’s a trusted safe-haven. During times of conflict or market turbulence, metal investors prefer holding gold instead of other assets. The gold pricing outlook can be a complex mix of prevailing financial market conditions and currency valuations, as well as current supply levels.

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The CME offers several gold futures products. By far, the most frequently traded is the full-size gold contract. Here are its specifications:

 

Symbol GC
Quantity 100 troy ounces
Quote U.S. dollars and cents per troy ounce
Minimum price move $0.10 per troy ounce
Minimum tick value $10 per tick
Settlement Physical delivery

Average daily traded volumes of the full-sized gold contract (GC) number in the hundreds of thousands depending upon market conditions. Other gold products offered by the CME Group are the E-mini and E-micro gold futures contracts.

Copper

Copper is classified as a base metal, meaning it’s not considered precious. However, copper is valuable due to its function as an electrical conductor and overall versatility. Copper is used extensively in electrical wiring, equipment manufacturing, and coinage.

Copper futures are normally the second-most frequently traded metal on the CME Group exchanges. Daily volumes typically eclipse 125,000, drawing the interest of producers and speculators alike. Here are the contract specifications for CME copper:

Symbol HG
Quantity 25,000 pounds
Quote U.S. cents per pound
Minimum price move $.0005 per pound
Minimum tick value $12.50
Settlement Physical delivery

At $12.50 per tick, copper is more capital intensive than the full-sized gold contract. Futures margins are typically higher, thus the CME offers E-mini copper to traders who desire less exposure. The copper price outlook is dependent upon cyclical industries, such as manufacturing and new home construction.

Silver

Often thought of as “poor man’s gold,” silver has played an important role in international trade for centuries. Considered to be precious, silver’s most common applications are in coinage, jewelry, and battery production.

The least traded of the big three metals, silver live futures average a volume in the neighborhood of 100,000 contracts per day. Portfolio diversification and production hedging are common uses. The silver price outlook relies greatly upon the global financial environment and current supply levels. Below are the specifications for the CME silver contract:

Symbol SI
Quantity 5,000 troy ounces
Quote U.S. cents per troy ounce
Minimum price move $0.005 per troy ounce
Minimum tick value $25.00
Settlement Physical delivery

Perhaps the least attractive attribute of the full-sized silver contract is the $25.00 per tick value. Small negative moves can prove costly, 2.5 times that of gold. The large tick value and limited market liquidity are factors that exclude many retail participants. As an alternative, the CME Group offers an E-mini silver contract to lessen the financial commitment.

Trading Metal Commodities

The metal commodities from the CME Group include something for everyone. Whether you are looking for ways of hedging risk or of implementing any variety of day trading strategies, metals may be an ideal way of achieving your market-related goals.

As with most things, trading metal futures involves a learning curve. A great place to start is a free consultation with a futures industry professional at Daniels Trading. In a short time, DT’s team of dedicated market veterans can help shed some light on the CME Group metals offerings.

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Filed Under: Futures 101

About Daniels Trading

Daniels Trading is division of StoneX Financial Inc. located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading was built on a culture of trust committed to a mission of Independence, Objectivity and Reliability.

Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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Risk Disclosure

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

© 2023 StoneX Group Inc. All Rights Reserved

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