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.
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.
The CME offers several gold futures products. By far, the most frequently traded is the full-size gold contract. Here are its specifications:
|Quantity||100 troy ounces|
|Quote||U.S. dollars and cents per troy ounce|
|Minimum price move||$0.10 per troy ounce|
|Minimum tick value||$10 per tick|
Average daily traded volumes of the full-sized gold contract (GC) number in the hundreds of thousands depending upon market conditions. Other gold products offered by the CME Group are the E-mini and E-micro gold futures contracts.
Copper is classified as a base metal, meaning it’s not considered precious. However, copper is valuable due to its function as an electrical conductor and overall versatility. Copper is used extensively in electrical wiring, equipment manufacturing, and coinage.
Copper futures are normally the second-most frequently traded metal on the CME Group exchanges. Daily volumes typically eclipse 125,000, drawing the interest of producers and speculators alike. Here are the contract specifications for CME copper:
|Quote||U.S. cents per pound|
|Minimum price move||$.0005 per pound|
|Minimum tick value||$12.50|
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.
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:
|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|
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.