Gold futures contract is viable alternative for those that like a speculative play, want an alternative investment or just want to avoid the inflation. Of course, you will have to risk a bit if you really want to win and you must be prepared to have some losses too.

A gold future contract is a binding agreement for gold delivery at a certain date in the future for a price you will pay right away. The contract specifies what quality the gold must have, the quantity delivered, the price, date and place of delivery.

You can sell these future contracts or buy them at a lower or higher price than the price stipulated in the paper. This leaves a lot of room for speculations.

Advantages:

Flexibility – all gold futures trades are centralized and thus very easy to manage, sell or track.

Financial leverage – you have the freedom to trade the product with just a fraction from its value. The leverage gives the possibility to gain a higher return if you take higher risks.

There are a few risks involved with the gold future contracts and it is your duty to calculate and manage them.

Contract Specifications

There are three different gold contracts in US – two from eCBOT and one from COMEX. They use 100 troy ounces for contracts and mini contracts for 33.2 troy ounces. Only at at the eCBOT you can trade these mini contracts.

Gold is traded in dollars and the price is calculated as cents per ounce. If you have a contract of 600/ounce then the amount you will have to pay is 600 x 100 ounces = $60,000. If you sell the contract at 610 then you will have a profit of $1,000 (10 x 100 ounces).

You cannot change your price with an increment lower than $0.10. To keep everything in order the marketers set a position limit regarding the maximum number gold future contract a single participant can have or hold.