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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.

Watch the on-demand webinar in which StoneX and CME Group discuss how their traders are utilizing their metal offerings on the market >>>

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.

On-Demand: “Exploring CME Group Gold and Silver Futures” Webinar

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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