Precious metals that include metals like gold, silver, platinum and palladium are a good investment instrument for traders. It provides a protective cover that helps traders to hedge against market inflation, speculation etc. Gold and silver are considered safe haven for investors.
Gold and silver future contracts can be a good option that meets all your hedging needs. Future market can be risky, but it holds high potential of earnings if traders have experience and skills. Future contracts of precious metals is an agreement that the gold or silver will be delivered on a pre decided price in the future. Most components of the contracts are standardised. Quality, time of delivery and place of delivery are fixed prior to the exchange. The price of the asset is the only variable component. Benefits of Investing in Gold and Silver Future Contracts
Futures are extremely beneficial for hedgers. They use these contracts to reduce the price risk that might arise at the time of physical metal trading. If you are a speculator, you can enter the market without any backing with the help of future contracts. There are many benefits of trading futures. “The most crucial advantage that a trader can get is higher leverage. Trader can earn huge profits with little capital investment”, says expert trader of easy markets
. The future contracts offers higher flexibility and integrity.
When a trader is trading in future market, s/he can easily initiate a short position into a long position. This is how traders protect their physical positions and speculators get positions in the market. The gold and silver exchange acts as a seller to the buyer and buyer to a seller. This helps in reducing the risk. Positions in the Gold and Silver Future Contracts
There are two different positions a trader can acquire. One is the buying position and the other is the selling position. The buying position is called the long position in which traders must accept the delivery. The traders taking long positions expect the prices to rise. The traders taking this position have no plan to sell the metals in near future. The short position is the selling position. The trader holding this position must make deliveries. They expect the prices to decline over time. Hedges and Speculations
The futures market provides a centralised marketplace for traders of commodities. If you want a hedge against adverse cash market movements, you can invest in these metals to reduce the risk. First the hedgers take physical position and then they take the opposite position. There is a correlation between future and spot market prices. This means, if loss occurs in one market, the gain in other market can set it off.
Speculators, unlike hedgers, do not want the physical delivery at all. Instead, they earn profits from market risk assumptions. Speculators can be individual investors, commodity trading advisors and hedging funds. There can be speculators of different types who stay in the market for different time period. Scalpers are speculators who frequently move in and out of the market. They hold their positions a little longer than scalpers. Multiple sessions are held by position traders. The speculators need to have a better idea about the market moves.
Trading in future gold and silver can be a profitable trading option, or can be a part of your trading portfolio for risk management. Trading in the future market needs traders to have expertise in trading.
As an investor in different markets, I find gold and silver investment options very safe and profitable. I have always used gold and silver contracts to hedge against the tough times in the market. What do you think about using future contracts?