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How to Invest in Gold Futures

November 13, 2020 by Daniels Trading| Futures 101

No matter what your investment goals are―whether it’s wealth appreciation or preservation―gold futures can help. Primarily available on the CME Globex, bullion contracts provide market participants with many speculative and hedging opportunities. If you’re an active investor, then gold derivatives are certainly worth a look.

At this point, you may be asking, “How can I invest in bullion via the futures markets?” Although the process differs from simply buying and holding the metal, it’s relatively straightforward. Let’s take a look at the hows and whys of gold investing in the futures markets.

What Are Gold Futures?

A gold futures contract is a legally binding agreement that specifies the delivery of a defined quantity of gold at a designated price on a forthcoming date in time. These contracts are standardized in terms of quality, quantity, and date of delivery.

As the world’s largest futures marketplace, the Chicago Mercantile Exchange (CME) offers a wide range of products for trade. Among the most popular are its precious metals listings, particularly those facing gold. Here are the details on the associated contracts:

Product Symbol Size Tick Value Intraday/Overnight Margins
Gold GC 100 troy ounces $10.00 $6,325/$11,500
E-Mini Gold OG 50 troy ounces $12.50 $6,325/$5,750
E-Micro Gold MGC 10 troy ounces $1.00 $632.50/$1,150

CME gold contracts offer investors a variety of leveraging options, each strategically valuable to participants of all sizes. No matter your capitalization or risk profile, there’s an ideal contract for your investment strategies and objectives.

Investing in CME Gold

Consistent market depth and pricing volatility attract both active traders and investors to CME gold futures. For investors with extended time horizons, bullion contracts offer a unique set of benefits:

  • Flexibility: Investors have the ability to take long or short positions in the market. This flexibility provides an opportunity to profit from rising or falling prices, thus exponentially increasing opportunities.
  • Leverage: Instead of buying physical bullion or metal ETFs, futures allow investors to leverage their risk capital. Although achieving extraordinary returns via increased leverage isn’t guaranteed, it’s certainly possible.
  • Reduced fees: Gold ETFs or mutual funds typically charge maintenance and management fees. Further, storing physical gold can accrue security costs. Futures contracts avoid these charges.
  • Tax benefits: Futures investors enjoy a tax reprieve compared to ETFs, mutual funds, or the sale of bullion holdings. Profits may be split between short- and long-term capital gains levies, thus reducing tax liabilities.

Although gold futures offer participants several key advantages, it’s important to remember that they are subject to expiration. For longer-term investors to hold active long or short positions in the market, it’s necessary to periodically roll over to the next desirable contract. To accomplish this task, a trader needs to close out an open position ahead of the contract’s expiration date and then open a new position in an upcoming contract.

According to CME gold contract specifications, monthly contracts are listed for three consecutive months; any February, April, August, or October in the nearest 23 months; and any June and December in the nearest 72 months. This is beneficial to investors because positions may be opened in deferred-month contracts months or years ahead of expiry.

Reach Your Investment Goals with Gold

Buying and selling gold futures is a great way to achieve almost any financial goal. Whether your investment objectives are rooted in portfolio diversification or wealth creation, CME gold contracts can be valuable assets.

For more information on the potential of bullion, check out Daniels Trading’s free e-book The Value of Gold. Inside, you’ll learn the ins and outs of gold market psychology, why gold is a store of value, and how institutions use the yellow metal as currency. It’s a must-read for any aspiring bullion investor.

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Filed Under: Futures 101

About Daniels Trading

Daniels Trading is an independent futures brokerage firm located in the heart of Chicago’s financial district. Established by renowned commodity trader Andy Daniels in 1995, Daniels Trading is built on a culture of trust committed to the firm’s mission of Independence, Objectivity and Reliability.

Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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Risk Disclosure

THIS MATERIAL IS CONVEYED AS A SOLICITATION FOR ENTERING INTO A DERIVATIVES TRANSACTION.

THIS MATERIAL HAS BEEN PREPARED BY A DANIELS TRADING BROKER WHO PROVIDES RESEARCH MARKET COMMENTARY AND TRADE RECOMMENDATIONS AS PART OF HIS OR HER SOLICITATION FOR ACCOUNTS AND SOLICITATION FOR TRADES; HOWEVER, DANIELS TRADING DOES NOT MAINTAIN A RESEARCH DEPARTMENT AS DEFINED IN CFTC RULE 1.71. DANIELS TRADING, ITS PRINCIPALS, BROKERS AND EMPLOYEES MAY TRADE IN DERIVATIVES FOR THEIR OWN ACCOUNTS OR FOR THE ACCOUNTS OF OTHERS. DUE TO VARIOUS FACTORS (SUCH AS RISK TOLERANCE, MARGIN REQUIREMENTS, TRADING OBJECTIVES, SHORT TERM VS. LONG TERM STRATEGIES, TECHNICAL VS. FUNDAMENTAL MARKET ANALYSIS, AND OTHER FACTORS) SUCH TRADING MAY RESULT IN THE INITIATION OR LIQUIDATION OF POSITIONS THAT ARE DIFFERENT FROM OR CONTRARY TO THE OPINIONS AND RECOMMENDATIONS CONTAINED THEREIN.

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE PERFORMANCE. THE RISK OF LOSS IN TRADING FUTURES CONTRACTS OR COMMODITY OPTIONS CAN BE SUBSTANTIAL, AND THEREFORE INVESTORS SHOULD UNDERSTAND THE RISKS INVOLVED IN TAKING LEVERAGED POSITIONS AND MUST ASSUME RESPONSIBILITY FOR THE RISKS ASSOCIATED WITH SUCH INVESTMENTS AND FOR THEIR RESULTS.

TRADE RECOMMENDATIONS AND PROFIT/LOSS CALCULATIONS MAY NOT INCLUDE COMMISSIONS AND FEES. PLEASE CONSULT YOUR BROKER FOR DETAILS BASED ON YOUR TRADING ARRANGEMENT AND COMMISSION SETUP.

YOU SHOULD CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES AND FINANCIAL RESOURCES. YOU SHOULD READ THE "RISK DISCLOSURE" WEBPAGE ACCESSED AT WWW.DANIELSTRADING.COM AT THE BOTTOM OF THE HOMEPAGE. DANIELS TRADING IS NOT AFFILIATED WITH NOR DOES IT ENDORSE ANY TRADING SYSTEM, NEWSLETTER OR OTHER SIMILAR SERVICE. DANIELS TRADING DOES NOT GUARANTEE OR VERIFY ANY PERFORMANCE CLAIMS MADE BY SUCH SYSTEMS OR SERVICE.

GLOBAL ASSET ADVISORS, LLC (“GAA”) (DBA: DANIELS TRADING, TOP THIRD AG MARKETING AND FUTURES ONLINE) IS AN INTRODUCING BROKER TO GAIN CAPITAL GROUP, LLC (GCG) A FUTURES COMMISSION MERCHANT AND RETAIL FOREIGN EXCHANGE DEALER. GAA AND GCG ARE WHOLLY OWNED SUBSIDIARIES OF STONEX GROUP INC. (NASDAQ:SNEX) THE ULTIMATE PARENT COMPANY.

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