The fact that futures only require a small portion of the contract value makes them a leveraged instrument. For example, if a gold contract has a total value of about $130,000 at current prices, only a small down payment of about $5940 is needed to buy or sell the contract. In other words, you can control $130,000 worth of gold for less than $6,000. This can potentially allow some investors to get a significant return on investment, but it can also lead to significant losses. Another source of key players in the silver futures markets is the financial industry. These actors may also be involved in speculative and arbitrage opportunities and include: In macroeconomics, consider the global economy at the national or global level. Examine the relative performance of alternative asset flows, including gold, the stock market, and oil. A price offer of $15.7 for a full silver contract (valued at 5,000 troy ounces) represents a total contract value of $15.7 x 5,000 = $78,500. The London Fix, while tailored to the futures market, also sets the initial daily “spot price” of an ounce of physical gold to measure widely reported daily gains or losses from an agreed starting point (an important feature in a market world virtually 24/7). There are a few different gold contracts that are traded on U.S. exchanges: one on the COMEX and two on the eCBOT. There is a 100 troy ounce contract traded on both exchanges and a mini-contract (33.2 troy ounces) traded only on eCBOT. Sometimes, however, a large speculator may accept the supply of physical metal.
That`s what Warren Buffett did in 1998 when he bought 130 million ounces of silver. Many saw this as a blatant attempt to manipulate the market, although the Omaha magician claimed that he was only doing what he considered a good long-term investment. Due to the nature of these vehicles, losses may exceed equity. Leverage is a double-edged sword and not suitable for all investors. Speculators can use these contracts to try to profit from gold or silver price movements, while hedgers can use them to mitigate price risk. While you can accept physical delivery for a gold or silver futures contract, most futures are now closed before expiration or settled in cash. But the situation is getting worse. As said above, if you bet on the price of gold by buying or selling a futures contract, the bookmaker could simply be an investment banker. He is now betting against you with an institutional advantage; It fully controls the delivery of your contract. Silver, like gold, trades in dollars and cents per ounce. For example, if silver is trading at $10 per ounce, the “big” contract is worth $50,000 (5,000 ounces x $10 per ounce), while the mini would be $10,000 (1,000 ounces x $10 per ounce). The Comex Exchange offers a standard silver futures contract for trading in three variants classified according to the number of troy ounces of silver (1 troy ounce is 31.1 grams).
Gold and silver are considered precious metals because they are rare and beautiful. But these characteristics are hardly a factor in setting the “spot” price of the COMEX. On this and other futures exchanges, derivatives are traded instead. They do not shine or shine and their offer is practically unlimited. Quite simply, it is a problem. On the demand side, industrial demand and investment demand for silver follow. Those who hold their positions until expiration receive or deliver (depending on whether they are the buyer or the seller) a 5,000-ounce silver warrant for a full-size silver futures contract based on their long or short term positions. A warrant allows its holder to own equivalent silver bars in designated custodians.
For example, if a farmer produces corn and is concerned that the price of corn per bushel will fall, reducing his potential profit, he could sell futures contracts. Today, if a corn farmer sells a futures contract for delivery in five months at a price of $4.00 per bushel, if the price of corn drops between now and the delivery date, the farmer would lose money for his cash crop, but offset those losses with gains from the sale of the futures contract. Silver futures are standardized contracts traded on the stock exchange in which the buyer of the contract agrees to accept a certain amount of money from the seller at a predetermined price on a future delivery date. Although its use as the nation`s currency ceased in 1965, an even more important economic function for silver emerged at the turn of the century: that of an industrial raw material. Today, silver is sought after as a valuable and convenient industrial commodity, and silver futures are considered an attractive investment that can be traded almost 24 hours a day, 6 days a week. The biggest industrial users of silver are the photo, jewelry and electronics industries. Silver futures are available for trading in the COMEX division on the New York Mercantile Exchange (NYMEX). In all the above cases, both the buyer and seller carry out the purchase/sale of silver at the desired price level. Gold futures are traded on both the COMEX division of the New York Mercantile Exchange (NYMEX) and the Intercontinental Exchange (ICE). The standard contract size is 100 troy ounces, with two other smaller contracts at 50 and 32.15 troy ounces. Both exchanges dictate the delivery of gold to New York safes and are subject to change by the exchange.
Trading gold futures requires an approved account to trade futures. Craig Hemke of TFMetalsReport.com explains in a recent article how investment banks are screwing up futures traders. He compared buying a futures contract to something more investors will know better: buying a stock. The number of actions is limited. When an investor buys shares of the Coca-Cola Company, he must be paired with another investor who owns real shares and wants to sell them at the prevailing price. It`s easy pricing. If I didn`t pay extra for it, the seller would simply sell his gold for dollars and deposit the dollars himself, keeping an extra 0.75% overall. The money trade has been around for centuries.
In its simplest form, it is only two people who agree on a future price of money and promise to settle the transaction on a fixed expiration date. However, futures trading is not standard. It is therefore full of a risk of default for counterparties. Are you planning to trade gold futures? Here are the specifications of gold futures. The main function of any futures market is to provide a centralized market to those who have an interest in buying or selling physical commodities at some point in the future. The metals futures market helps hedgers reduce the risk associated with adverse price movements in the spot market. Examples of roofers include bank safes, mines, manufacturers and jewellers. Silver futures are offered by NYMEX`s COMEX division on the Globex trading platform® and can be traded electronically via Schwab almost 24 hours a day, 6 days a week.
In addition to silver futures, gold futures (GC) listed on the COMEX and copper futures (HG) contracts listed on the NYMEX are available for trading at Schwab. .