Gold & Silver Futures Contract

What Is A Gold And Silver Futures Contract, Exactly?

With the formation of a central grain market in the mid-nineteenth century, futures contracts were first traded. Farmers could sell their grains for immediate delivery on the spot market or sell it for a set price for future delivery date on this central grain market. A futures contract is the  legal agreement between a buyer and a seller to buy or sell an item on a certain day in a specific month.

A futures exchange facilitates the buying and selling of futures contracts, which are standardized in terms of the quality, quantity, delivery time, and delivery location. A futures contract’s price, on the other hand, is never fixed and is constantly discovered via an auction-like process on exchanges trading floors and computerized trading platforms. A futures contract for silver and gold bullion specifies a precise delivery time and location for “good delivery” silver and gold bullion.

What Is A Futures Contract And How Does It Work?

With a Gold and silver future contract, he / she is agreeing to buy or sell the metal at a specific date in future through an exchange. The COMEX exchange, that is now part of Chicago’s CME Group, is the most well-known exchange for metals trading. To purchase and sell a futures contract, you don’t need the entire contract value; instead, you’ll need to make a margin deposit. A border deposit is a deposit made in good faith to ensure that the contract is fulfilled.

Futures contracts are leveraged because they only require a tiny fraction of  contract value to be invested. For instance, if the gold contract had a total value of around $130,000 at today’s costs, buying or selling the contract requires only a tiny deposit of roughly $5940.To put it another way, for lower than $6000, you can have control of $130,000 value of gold. This could allow some investor to make a huge profit, but it could also result in significant losses.

Because of the nature of these vehicles, losses can surpass account equity. Leverage has two sides and is not appropriate for all investors. Speculators may utilize these contracts to profit from price fluctuations in gold or silver, while hedger may use them to reduce price risk. While physical delivery of gold and silver futures contracts is possible, most futures contracts are now closed before expiration or settled in cash.

Value Of Gold And Silver Futures Contracts

A gold future contract is a contract for the purchase or selling of 100 troy ounces of.995 pure gold. A silver future contract allows you to buy or sell 5000 troy ounces of.999 percent pure silver. With gold currently pricing at $1,303 per ounce, the gold futures contract could be worth around $130,300 at today’s prices. A silver futures contract will be worth $103,150 at the current price of $20.63 per ounce.. The entire contract value will, of course, change as silver and gold prices rise and fall.