How to Trade Gold Futures2015-06-24
Gold is one of the most popular assets in the world. This precious metal has proven its value over and over with its impressive track record. Gold investing can be used as part of a long-term strategy, or for short-term futures investments for speculation trades.
For those looking to dabble in gold futures, there are a number of options available. Below, we outline strategies for trading gold futures as well as a few other products that offer similar exposure.
First thing’s first: those looking to invest in futures will need to decide which exchanges they would like to utilize. Below are three of the most popular options in the world for trading gold futures.
- Commodity Exchange: The COMEX, a member of the CME Group, offers exposure to a number of commodities with a focus on metals. The standard gold contract represents 100 troy ounces, while the miNY and micro contracts represent 50 ounces and 10 ounces respectively. It should be noted that there are also gold volatility futures for traders who wish to play the metal in that regard. One benefit to these contracts is that they trade Sunday to Friday between the hours of 6:00 p.m. and 5:15 p.m (CST), meaning that investors can make a play for approximately 23 hours every day (there is a 45 minute break period between each day).
- London Metal Exchange: The LME offers gold forwards curve data to any investor interested in signing up. Investors will be able to see one-week forward curves as well as one, two, three, six, nine, 12 and 18 months forward, giving a great long-term view on the metal [for more gold analysis subscribe to our free newsletter].
- Multi-Commodity Exchange (MCX): The Indian exchange offers a number of contracts for gold including standard gold (one kilogram), gold mini (100 grams), gold guinea (eight grams), and gold petal (one gram) contracts. This may be an exchange better suited for investors with a smaller capital base.
Common Gold Trading Strategies
As far as futures contracts are concerned, playing gold requires a considerable amount of attention and should be left to only the most active of traders. Neglecting your position for even an hour can have a dramatic effect on the outcome of your investment. Gold’s big price drivers are inflation, overall demand (be it financial instruments or institutions), and the actions taken by global banks, such as the various quantitative easing programs. Finally, it is important to remember that as a primary trading instrument, developing trends in markets and how the majority of traders are behaving can also skew gold prices. Remember, the trend is your friend.
For those who choose to shy away from actual futures contracts, there are still options available for trading. Perhaps the best alternative to outright owning the contracts is to utilize the SPDR Gold Trust, which is the second largest ETF in the world. Investors can also look to the iShares COMEX Gold Trust (IAU), which is also physically backed, but charges 15 basis points less for investment. Other ETF options include:
|GLD||SPDR Gold Trust||0.40%|
|IAU||COMEX Gold Trust||0.25%|
|SGOL||Physical Swiss Gold Shares||0.39%|
|DGL||DB Gold Fund||0.79%|
|DGP||DB Gold Double Long ETN||0.75%|
|DZZ||DB Gold Double Short ETN||0.75%|
|AGOL||Physical Asian Gold Shares||0.39%|
|TBAR||Gold Trendpilot ETN||1.00%|
|UGLD||3x Long Gold ETN||1.35%|
|DGLD||3x Inverse Gold ETN||1.35%|
|DGZ||DB Gold Short ETN||0.75%|
|GEUR||Gartman Gold/Euro ETF||0.65%|
|GYEN||Gartman Gold/Yen ETF||0.65%|
|UBG||E-TRACS UBS Bloomberg CMCI Gold ETN||0.30%|
|BARS||Daily Gold Bear 3x Shares||1.56%|
|BAR||Daily Gold Bull 3x Shares||1.56%|
|GLDI||Gold Shares Covered Call ETN||0.65%|
Further Resources and Reading
For further reading on silver and related topics, check out some of the links below [see also Were Gold and Silver Manipulated Alongside LIBOR?].
- Commodity HQ Trading Center – Our free trading center offers details on your favorite commodity futures and exchange traded products.
- Commodity HQ Heatmap Tool – Our free tool allows investors to easily compare the past performance of their favorite commodities.
- COMEX Gold Page – Home page for gold on the COMEX.
- LME Gold Page – Home page for gold on the LME.
- MCX Gold Page – Home page for gold on the MCX.
Disclosure: No positions at time of writing.