How to Invest in Gold Futures | StoneX

No matter what your investment goals are―whether it’s wealth appreciation or preservation―gold futures can help. Primarily available on the CME Globex, bullion contracts provide market participants with many speculative and hedging opportunities. If you’re an active investor, then gold derivatives are certainly worth a look.

At this point, you may be asking, “How can I invest in bullion via the futures markets?” Although the process differs from simply buying and holding the metal, it’s relatively straightforward. Let’s take a look at the hows and whys of gold investing in the futures markets.

What Are Gold Futures?

A gold futures contract is a legally binding agreement that specifies the delivery of a defined quantity of gold at a designated price on a forthcoming date in time. These contracts are standardized in terms of quality, quantity, and date of delivery.

As the world’s largest futures marketplace, the Chicago Mercantile Exchange (CME) offers a wide range of products for trade. Among the most popular are its precious metals listings, particularly those facing gold. Here are the details on the associated contracts:

CME gold contracts offer investors a variety of leveraging options, each strategically valuable to participants of all sizes. No matter your capitalization or risk profile, there’s an ideal contract for your investment strategies and objectives.

Investing in CME Gold

Consistent market depth and pricing volatility attract both active traders and investors to CME gold futures. For investors with extended time horizons, bullion contracts offer a unique set of benefits:

• Flexibility: Investors have the ability to take long or short positions in the market. This flexibility provides an opportunity to profit from rising or falling prices, thus exponentially increasing opportunities.
• Leverage: Instead of buying physical bullion or metal ETFs, futures allow investors to leverage their risk capital. Although achieving extraordinary returns via increased leverage isn’t guaranteed, it’s certainly possible.
• Reduced fees: Gold ETFs or mutual funds typically charge maintenance and management fees. Further, storing physical gold can accrue security costs. Futures contracts avoid these charges.
• Tax benefits: Futures investors enjoy a tax reprieve compared to ETFs, mutual funds, or the sale of bullion holdings. Profits may be split between short- and long-term capital gains levies, thus reducing tax liabilities.

Although gold futures offer participants several key advantages, it’s important to remember that they are subject to expiration. For longer-term investors to hold active long or short positions in the market, it’s necessary to periodically roll over to the next desirable contract. To accomplish this task, a trader needs to close out an open position ahead of the contract’s expiration date and then open a new position in an upcoming contract.

According to CME gold contract specifications, monthly contracts are listed for three consecutive months; any February, April, August, or October in the nearest 23 months; and any June and December in the nearest 72 months. This is beneficial to investors because positions may be opened in deferred-month contracts months or years ahead of expiry.

Reach Your Investment Goals with Gold

Buying and selling gold futures is a great way to achieve almost any financial goal. Whether your investment objectives are rooted in portfolio diversification or wealth creation, CME gold contracts can be valuable assets.