What is gold?
Gold has been used as a transactional currency and symbol of wealth for thousands of years. Gold is incredibly durable—like many elements, it cannot be completely destroyed. A significant amount of all the gold mined on Earth is still around in some form today. The challenges involved with gold exploration, mining and refining, along with gold’s scarcity and limited supply, has helped it become a primary source of wealth and value for governments and individuals worldwide.
Why trade gold futures?
Cost effective way to participate in the gold marketplace
High liquidity compared to other asset classes
Nearly 24-hour trading to capitalize on opportunities
Diversify your trading with uncorrelated products
Gold futures (contract symbol = GC) are a well-established market that provides traders with direct exposure to speculate on the price movement of gold. It’s a much more efficient investment alternative to gold coins, bullion or gold mining stocks.
Around 50% of all gold produced in the world is used in the creation of jewelry and approximately another 30% of world gold production is used for investment storage by individuals and central banks. Gold is held by most central banks to help guarantee the stability of their currency, which is why it’s vitally important to the world’s financial markets. The remaining 20% of gold production is used for industrial and manufacturing purposes.
Who trades gold futures?
Gold futures traders can be broken down into three main groups: commercial traders, large professional speculators, and everyone else, including self-directed retail traders.
- Commercial traders are typically trading futures to hedge the price of gold. For example, gold mining companies that trade futures are hedging known gold reserves that are in the ground, yet to be mined. Commercial traders are typically industrial companies that use large amounts of gold to manufacture jewelry, medical devices, electronics and aerospace. They will often take delivery of gold.
- Large professional speculators are typically commodity pool operators, proprietary trading firms, institutional investors and hedge funds. These traders, along with commercial traders, make up 80% or more of the daily trading volume in gold futures. With the goal of speculating on the price movement of gold and generally do not take delivery or hold actual gold.
- Self-directed retail traders rarely take actual delivery of gold and often avoid delivery by closing their future contracts prior to the first notice date or expiration date of the contract.
What impacts the price of gold futures?
Geopolitical and geoeconomic factors like international conflicts, political instability, and other types of negative economic news can create uncertainty that can drive investors to purchase gold as a flight to safety. Conversely, when the international economic environment is stable and growing, the demand for gold can decrease, which can lower prices.
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Risk of gold futures trading
Whereas physical gold is a passive investment, trading gold futures entails a more active approach that should only be taken on by traders who have researched the market, understand contract specifications, and have a detailed, tested futures trading plan.
If you’re just getting started trading, practice in a trading simulator until you can prove to yourself that you can make simulated dollars. Then when you start trading with real dollars, trade small sizes to start and work your way up.
With gold futures or really any futures market, it’s often easy for traders to get caught up in the excitement of the price action. Even smart experienced traders can have large losses, which is why you should define a risk management strategy and only trade with risk capital—money you can afford to lose without affecting your lifestyle or retirement horizon.
Gold futures contracts specifications
Gold futures are standardized exchange-traded contracts that represent 100 ounces of gold (standard contract) or 10 ounces of gold (Micro contract). You can trade Gold futures through the Chicago Mercantile Exchange (CME) on the electronic CME Globex system.
Retail traders generally buy and sell gold futures contracts to speculate that the price will go up or down and typically do not want to take delivery of the physical gold. Traders holding long or short gold positions must close their positions prior to the first notice date to avoid the possibility being assigned delivery or required to deliver. NinjaTrader’s policy is to auto-liquidate any open physically delivered contract position going into first notice date.
Standard Contract: Gold (Symbol = GC)
Exchange: CME GLOBEX
Contract point value: 100 troy ounces
Minimum price fluctuation: 0.10, (100 * 0.1 = $10.00 per-contract per-minimum move)
Trading hours: Sunday 6:00 pm ET to Friday 5:00 pm ET
Listed contracts: Monthly contracts listed for 3 consecutive months, any Feb(G), Apr(J), Aug(Q), and Oct(V) in the nearest 23 months and any Jun and Dec in the nearest 72 months.
First notice date^: Last trading day of the month prior to the contract month
Expiration style: Trading ceases at 1:30 pm ET on the third last business day of the contract month
Settlement: Deliverable
View all specifications from CME Group
Micro Contract: Micro Gold (Symbol = MGC)
Exchange: CME GLOBEX
Contract point value: 10 troy ounces
Minimum price fluctuation: 0.10, (10 * 0.1 = $1.00 per-contract per-minimum move)
Trading hours: Sunday 6:00 pm ET to Friday 5:00 pm ET
Listed contracts: Monthly contracts (Feb(G), Apr(J), Jun(M), Aug(Q), Oct(V), and Dec(Z) in the nearest 24 months
First notice date^: Last trading day of the month prior to the contract month
Expiration style: Trading ceases on the third last business day of the prior to contract month
Settlement: Deliverable
Become a gold futures trader today
Ready to start trading Gold futures and Micro Gold futures? NinjaTrader is here to support you. With an award-winning trading platform and daily premium market commentary with industry pros, NinjaTrader equips you with the tools you need to embark on your futures trading journey.
^In any futures market where there is physical delivery, in order to prevent the possibility of physical delivery, it is NinjaTrader’s policy to close all open futures positions one day prior to first notice date or one day prior to last trading day, whichever is earlier.