How To Buy Gold Futures
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Gold bullion. One of the most popular ways to invest in gold is to own bars of gold. Investors buy bars of gold ranging from a few grams to more than 400 ounces. The most common sizes are 1-ounce and 10-ounce bars.
Bullion banks. Precious metal dealers offer allocated and unallocated gold accounts. Allocated gold is an asset that cannot be used for other purposes. Unallocated accounts are essentially unsecured creditors of the bank.
Gold futures. These contracts allow investors to profit from future changes in the price of gold. Unlike an options contract, a futures contract requires both parties to follow through with the transaction, even if they are unprofitable.
Mutual funds and ETFs that own gold. These funds avoid the hassle and risk of owning physical gold while efficiently tracking the price of the commodity. Fund fees reduce your overall returns.
Manufacturers that use gold to produce their products use gold futures contracts to lock in prices for this precious metal. They take possession of the gold and use it to create their products. Some investors also choose to purchase gold futures contracts because they view gold as a reliable store of value.
Trading times. Gold futures are traded from 6 pm to 5 pm Eastern time on Sunday through Friday. There is a 60-minute break in trading that starts at 5 pm Eastern time. No trading occurs on Saturdays.
Gold futures offer the ability to invest in gold without taking possession of it. These contracts are traded almost 24 hours a day and provide excellent liquidity if you want to buy or sell quickly. Futures trading can be complicated and are not suitable for all investors due to the ability to lose far more than your original investment.
Most advisors recommend having a diversified portfolio. Adding precious metals offers additional diversification and non-correlated assets to your portfolio. Our asset allocation calculator can help you determine how much of your portfolio to invest in precious metals like gold and silver.
Gold has been on a surprisingly steep downward streak in recent months, plunging from about $2,016 in March to around $1,650 per ounce in mid-October. Last week, gold futures saw some excitement before falling again Monday to continue the downturn. All told, the yellow metal is near its lowest point in the last 2.5 years.
Gold futures are often used by companies like refineries, manufacturers and jewelers to lock in gold prices. Some also use gold futures to hedge their price risk on future deliveries by simultaneously betting on prices going the opposite direction. By buying in one direction and hedge in another, buyers can mitigate potential future losses.
Additionally, factors like high interest rates, low inflation and high consumer confidence can prompt investors to lose faith (or interest) in gold. When investors leave the precious metal, the price may experience more short-term volatility and ultimately drop for a few weeks or months before recovering again.
Gold futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of gold at a predetermined price on a future delivery date. Gold futures give companies involved in the precious metals industry a way to hedge their gold price risk on an expected future purchase or sale of gold. They also allow investors to participate in an easy and convenient alternative to traditional means of investing in gold. Gold can be considered the ultimate store of value. Buying gold futures contracts as an anti-inflation hedge may be their primary use. The liquidity of the gold futures contract often makes it easier to take advantage of opportunities in nearly all market conditions.
Gold futures are traded at the COMEX division of the New York Mercantile Exchange (NYMEX). The standard contract size is 100 troy ounces, with two additional smaller contracts at 50 and 10 troy ounces. The exchange specifies the delivery of gold to New York area vaults and are subject to change by the exchange. An account approved to trade futures is required in order to trade gold futures.
Gold futures contracts can be used for either hedging or speculation. Companies that rely on gold as materials for manufacturing or resale (jewelry) can trade them to lock-in a future price for the precious metal. Similarly, speculative investors and traders can use gold futures as a way to participate in the markets without any physical backing of the material and to express investor sentiment on the future price of gold.
It is important to understand the benefits and risks involved with gold futures before placing a futures trade. Compared to traditional investments, with gold futures you can trade nearly 24 hours a day during the trading week and take advantage of trading opportunities regardless of market direction. Gold futures also provide the ability to trade with greater leverage and allow a more efficient use of trading capital. However, trading leveraged products like gold futures also involves the risk that losses can exceed the amount originally invested and may not be suitable for all investors.
Futures and futures options trading involves substantial risk and is not suitable for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products. Futures accounts are not protected by SIPC. Futures and futures options trading services provided by Charles Schwab Futures and Forex LLC. Trading privileges subject to review and approval. Not all clients will qualify.
Gold options are derivatives contracts that utilize either physical gold or gold futures as their underlying instrument. They allow investors to attain a position in gold with less up-front capital than buying physical gold or gold futures. Unlike futures, gold options provide the right, but not the obligation, to buy or sell gold at a specified price on or before the contract expires.\"}},{\"@type\": \"Question\",\"name\": \"What are the advantages of trading gold options\",\"acceptedAnswer\": {\"@type\": \"Answer\",\"text\": \"Gold options allow investors to profit whether gold prices rise or fall - or even stays the same. They also provide a shorter-term and less capital-intensive way to invest in gold.\"}},{\"@type\": \"Question\",\"name\": \"Where are gold options traded\",\"acceptedAnswer\": {\"@type\": \"Answer\",\"text\": \"Gold options are available in the U.S. through the CME Group's COMEX subsidiary. Note that not all brokers will allow direct access to gold options markets, even with options trading you may be limited to options on stocks and ETFs (although you can use that ability to trade options on gold ETFs or mining stocks).\"}},{\"@type\": \"Question\",\"name\": \"What are the specifications of gold options\",\"acceptedAnswer\": {\"@type\": \"Answer\",\"text\": \"Gold options are cleared through the Chicago Mercantile Exchange (CME) on its COMEX unit, trading under the symbol heading \"OG\". The value of the options is tied to the price of gold futures, which also trade on the CME (among other venues), and each options contract represents 100 troy ounces of gold. Monthly contracts are listed for 20 consecutive months and any Jun or Dec in the nearest 72 months.\"}}]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsGold Calls and PutsHow to Trade Gold OptionsGold Options SpecificationsFAQsThe Bottom LineOptions and DerivativesStrategy & EducationHow To Buy Gold OptionsByCory Mitchell Full Bio LinkedIn Twitter Cory Mitchell, CMT is the founder of TradeThatSwing.com. He has been a professional day and swing trader since 2005. Cory is an expert on stock, forex and futures price action trading strategies.Learn about our editorial policiesUpdated January 25, 2023Reviewed byThomas Brock Reviewed byThomas BrockFull BioThomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.Learn about our Financial Review BoardFact checked by 59ce067264
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