Principal markets in the U.S. for gold futures are the COMMODITY EXCHANGE, INC. of New York (Comex) and the International Monetary Market of the CHICAGO MERCANTILE EXCHANGE.
Comex Gold Futures Contract.
A Comex gold futures contract calls for delivery of a specific grade of refined gold in standard bars during one of the specified future months. The contract's price is established through the meeting of bids and offers by open outcry among brokers trading in the gold ring on the floor of the exchange.
In fulfillment of every contract of gold, the seller must deliver 100 troy ounces (5% more or less) of refined gold, assaying not less than 0.995 fineness, cast either in one bar or in three one-kilogram bars and bearing a serial number and identifying stamp of a refiner approved and listed by Comex.
Trading is conducted for delivery during the current calendar month; the next two calendar months; and any February, April, June, August, October, and December falling within a 23-month period beginning with the current month. Limiting the number of delivery months concentrates and therefore increases trading activity in these months, thereby improving market liquidity and preventing price distortions.
Deliveries of gold bullion against futures contracts traded on Comex are made at the seller's option during any business day within the month specified in the contract. Bullion must be made available to the buyer at one of the vaults licensed by Comex. Licensed depositories are vaults judged by Comex to be safe and sufficiently well guarded to deter theft. Periodic random examinations by independent auditors are conducted at these valutas to ascertain the accuracy of the depository receipts.
Price changes are registered in multiples of $.10 per troy ounce (equivalent to $10 per contract). A fluctuation of $1 is therefore equivalent to $100 per contract.
During any one market day, price fluctuations for each delivery month are limited to $25 per troy ounce above or below the settlement price established at the close of the preceding business day. If the change in the settlement price for any contract month (not necessarily the same month) equals the daily price fluctuation limit on two consecutive days, a system of expanded price limits becomes effective automatically. Price limitations do not apply to prices for the current delivery month.
Commissions are charged by brokerage houses for handling a futures contract trade. Since March 6, 1978, all fixed commission rates have been eliminated and are fully negotiable.
Original margin requirements for Comex trading are designed to maintain the financial integrity of each futures contract. Margin levels are determined by the Comex board of governors and reflect the price votality of a commodity. A trader must add to his original margin, on a predetermined schedule, whenever the market prices go against the contract he holds. Conversely, a trader may withdraw excess equity as the market moves in his favor.
The largest segment of futures trading on Comex consists of hedging and speculating interests which normally offset their positions before their contracts mature to avoid having to accept or make delivery of physicals. However, Comex points out that it is also a viable physical supply market, with purchases and sales of physicals forming a significant part of Comex trading. Buyers of gold futures contracts who elect an exchange for physical (EFP) will arrange for specific delivery of physicals with a gold supplier while simultaneously offsetting the gold futures contracts previously purchased by selling futures contracts to that supplier. Using an EFP, the supplier will have the advantage of not having to split his delivery into standard 100-ounce or three-kilogram bar lots, and although he will charge delivery costs to the buyer, he will avoid the expenses of transportation, handling, and weighing in the Comex warehouse. EFPs can be arranged by, and handled through, qualified brokers or other Comex member firms who determine various costs and/or savings involved through open negotiation. First delivery notice day is the next to the last business day of the month prior to a maEagle Tradersg delivery month. Last delivery notice day is the second to the last business day of a maEagle Tradersg delivery month (the day after the last trading day). The last trading day is the third to the last business day of a maEagle Tradersg delivery month.
Gold Futures Trading on Other Exchanges.
Gold futures in 100-ounce contracts also trade on the CHICAGO BOARD OF TRADE and the International Monetary Market Division of the Chicago Mercantile Exchange. A third Chicago futures market for gold futures, the Mid-America Commodity Exchange, trades in "minicontracts" which are one-third (33.2 ounces) of the standard contract size of 100 troy ounces in gold futures.
The appended table compares the annual volume of trading in gold futures in recent years.
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