Trading Metals futures contracts isn’t just your regular “Cash for Gold” TV commercial that we see every second of the day. It is a more complex than that. You first have to understand the history and the makeup up the precious metals and how they are priced.
Gold, Silver, and Copper are all traded on the COMEX exchange.
COMEX, originally known as Commodity Exchange Inc., is a division of the New York Mercantile Exchange. The main focus of COMEX is options trading that have to do with precious metals. Based in New York City, COMEX provides investment opportunities to investors all over the world. Comex’s operating hours are from 8am to 1:30pm NY time.
The Commodity Exchange Inc. was first established in New York in 1933. During the first forty years of existence, COMEX focused on trading copper, silver, and aluminum. This began to change in 1974, after changes in laws in the United States made it possible for US investors to once again hold gold as an investment and asset. On 31 December 1974, the exchange launched its first gold futures contract. Within a very short period of time, COMEX became the leader in gold futures transactions. In 1982, options on gold futures were added.
Because of the world wide investor base for COMEX, it is not unusual for traders in Asia and the Middle East to monitor activity on the exchange until closing each business day. In response to this trend, COMEX has over the years adjusted the hours of operation to more accurately reflect the world wide nature of the client base and open earlier in the day in order to accommodate investors in a wider range of times zones around the world. This type of activity has led to the exchange continuing to grow in both total value traded and the number of active traders.
The only two precious metals that do not trade on the COMEX are Platinum and Palladium. They both trade on the NYMEX, the exchange that is directly under COMEX and is now a part of the CME Group in Chicago.
All of these metals are quoted in US Dolllars. Gold trades in increments of .10 cents and is now priced in the high $800’s. Like other precious metals, gold is measured by troy weight (100oz.) and by grams. When it is alloyed with other metals the term carat or karat is used to indicate the amount of gold present, with 24 karats being pure gold and lower ratings proportionally less.
Silver’s price changes are registered in multiples of one-tenth of a cent (0.10¢ or $0.001) per troy ounce, equivalent to $5.00 per contract. There are 5,000 troy ounces in one trading unit and the current price for Silver is in the mid $12 range.
Copper price changes are registered in multiples of five one-hundredths of one cent (0.05¢ or $0.0005) per pound, equivalent to $12.50 per contract. A fluctuation of one cent (1¢ or $0.01) is equivalent to $250 per contract. There are 25,000 pounds in one unit and Copper’s current value is $1.55.
Platinum trading is conducted over 15 months, beginning with the current month and the next two consecutive months before moving into the quarterly cycle of January, April, July, and October. Platinum’s minimum price fluctuation is $0.10 (10¢) per troy ounce ($5.00 per contract). There are 50 troy ounces in one unit and the precious metal goes for $975 on the open market.
Palladium is traded just like Platinum but with different months, conducted over 15 months, beginning with the current month and the next two consecutive months before moving into the quarterly cycle of March, June, September, and December. Minimum price tick is $0.05 (5¢) per troy ounce ($5.00 per contract). Just like Gold, there are 100 troy ounces in a single unit of and the going rate is $200 per contract.
Trading in futures and options involves a substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
