Metal Trading|iBull Capital

Potential Advantages of Trading Futures Gold Futures vs. Spot

GOLD FUTURES

Gold futures are cleared via a centralized exchange with standardized contracts and complete fiduciary transparency. With centralized markets, investors have access nearly 24hrs a day.

All brokers are Series 3 licensed with the CFTC and members of the NFA.

SPOT GOLD

Gold futures are cleared via a centralized exchange with standardized contracts and complete fiduciary transparency. With centralized markets, investors have access nearly 24hrs a day.

All brokers are Series 3 licensed with the CFTC and members of the NFA.

Spreads Explained

The spread is the difference between the bid and ask price; or what someone is willing to buy and sell the precious metal for on the spot market. The spread is perhaps a way for spot dealers to disguise commission as hidden fees, which in turn produces revenues for them. This is contrary to the transparent nature of the futures markets and unlike the futures market this fee is NOT typically disclosed.

EXAMPLE

10oz of spot Gold at today’s price equals $17,500, and if you are paying a 3% spread; this spread (transaction) is costing you $525 as a hidden fee. If you ask your gold dealer to sell you 10oz of gold and the purchase price is quoted to you as $1,750/oz, the actual purchase price would be about $1,697.50/oz which is $52.50 below the price you were charged. Basically you’re losing $52.50 per oz. from the start or $525 in “spread charges.” Not your ideal way to start an investment. In addition, some dealers will offer to store the gold for you and charge you fees plus insurance costs. They may also tack on additional commissions and transaction fees.

For the same transaction in the futures markets, the commission would be approximately $50-$80 and this charge is disclosed to you before your purchase.

Margins Explained

Using margin to trade can be like a down payment for a house; this is when you put 20% down, and then you finance the remaining balance. It’s a way of controlling more, using less of your own personal money. However, trading using margin can be a double edge sword. It can work against or for you depending how it’s structured. One of the most common mistakes I see made is using minimum margin to control the maximum amount of gold with the least amount of money. However, in Gold Futures, you can structure it to any ratio you like and even pay off the balance and then take delivery without the high costs associated with the spot/physical.

EXAMPLE

Minimum margin or money needed to trade E-micro Gold (10oz) $1,148, Mini Gold (33.3oz) $5,738, Full Size (100oz) $11,475

HINT

Futures accounts require no interest payment on outstanding balances. For your entire financial portfolio Forex Funda suggest you should have 20% to 30% exposure.

Three gold futures contracts sizes to choose from

E-MICRO

Contract Sizes (troy oz.)

10oz

MINI-GOLD

33.3oz

FULL SIZE GOLD

100oz

Three gold futures contracts sizes to choose from

Gold Futures open every Sunday evening at 6:00 PM EST, then closes every day at 5:15 PM EST, then re-opens at 6:00 PM. Sunday – Friday it’s closed for only 45 min. each day between 5:15 PM EST – 6:00 PM EST, almost a 24 hour trading day!

HINT

Futures accounts require no interest payment on outstanding balances. For your entire financial portfolio Forex Funda suggest you should have 20% to 30% exposure.

Gold futures tic value

Depending on the movement of the market, each tic upward or downward in the market represents how much you will either make or lose. For example, in gold futures, each tic .1 will either gain or lose the amount listed below:

EXAMPLE

Minimum margin or money needed to trade E-micro Gold (10oz) $1,148, Mini Gold (33.3oz) $5,738, Full Size (100oz) $11,475