Go For Gold Futures On NYMEX
As economic uncertainty grips the markets, all eyes turn to gold as a safe haven.
So what of gold futures contracts traded on the COMEX Division of NYMEX? Can this be one way for an investor to balance their investment portfolio and have exposure to the bright yellow precious metal?
What is so special about gold, anyway? Is it the valuable commodity that is hailed as the place to go when times get tough?
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As a malleable, ductile, bright yellow metal, gold has excellent industrial applications in electronics, being an excellent conductor of electricity and its resistance to corrosion.
But worries about the return of inflation usually signal a renewed interest in gold.
Just consider that after the Bretton Woods agreement in 1944, the Gold Standard was set up and one troy ounce of the metal was valued at $35. In 1975 the US finally broke the link between the dollar and gold, allowing it to find its own level. Today gold is just below $1,000.
In March 2008, gold futures on NYMEX reached an all-time high in the midst of the serious banking crisis in US financial markets stemming from the sub-prime loan crisis.
You may be seriosuly thinking about getting into gold futures as one way of riding on the wave of commodity price increases.
These futures contracts on the COMEX Division of NYMEX are used by gold mining companies as well as end users to manage risk, and by many traders who look to profit from the movement in gold futures prices.
So you have set up an account with your commodity trading broker and he has explained the rules regarding trading on margin.
You have considered carefully the risk of loss to your capital from taking a leveraged position in the futures market. And now you are ready to dip your toe into the market.
Though the open outcry system operates on NYMEX, it is more than likely you will be using the global electronic trading platform called COMEX.
The exchange will be open for you to trade through this platform from 6.00 pm Sunday through to 5.15 pm on Friday, with a 45 minute break each day from 5.15 pm to 6.00 pm.
As with silver, the buyer or seller of gold futures can exchange this for a similar physical position.
The Exchange of Futures for Physicals (EFP) contract allows you to start or liquidate a gold futures contract.
So if you don’t want to have the gold actually delivered from a depository licensed by the exchange you would probably need to liquidate prior to the first day of delivery in the contract delivery month.
The actual trading months can seem a bit complicated at first.
To give an idea of the change in futures prices, consider that at the time of writing May 2008 gold was $892.90, August was $900.10, while October 2008 was $904.40.
As with silver, gold is in contango and it would only be in unusual circumstances that these precious metal futures were in backwardation.
As we move towards the end of the first decade of the 21st century, global commodities are in a strong bull run.
With economic and global political uncertainties never far away, traders and investors will likely keep a very sharp eye on the direction of gold futures going forward.
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