Silver Mini

July 17th, 2008 admin Leave a comment Go to comments

Silver Mini

Gold And Silver Trading Futures Contracts

There are a lot of reasons for investing in precious metals like gold and silver. These types of investments can be a safeguard against inflation, can be very helpful for diversifying risk in a multi-asset portfolio, are a valuable hedge against crisis situations, and are secure and liquid assets.

The term ‘precious metals futures contract’ refers to the legal contract to buy or sell a specific weight of gold or silver at an agreed time in the future at a decided price. The contracts are characterized by a futures exchange as to quality, quantity, time and place of delivery.

Hedgers make use this contract as a way to control their price risk on an expected purchase or sale of the metal. They can manage the risk associated with adverse price movements in the cash market. Bank vaults, manufacturers, mines and jewelers are a few examples of hedgers. For speculators, it provides an opportunity to take part in the markets without any physical backing. Examples of speculators include hedge funds, individual investors, or commodity trading advisors.

The investor can choose two different positions - Long (buy) position and Short (sell) position. The first type is an obligation to accept delivery of the physical metal, while the second type refers to the obligation to make delivery. Futures contracts are mostly offset prior to the delivery date. This situation is happened when the investor with a long position looks for a short position in the same contract, as a result the original long position is to be eliminated.

Major advantages of Precious Metals Futures Contracts include:

• Offering more financial leverage, flexibility and financial integrity compared to trading the commodities themselves.
• No counter party risks as the futures contracts are insured by clearing firms.
• Easy to go short or long position with high flexibility to protect your money
• Cover from price uncertainties

Gold and Silver futures are traded dollar per ounce. Standard futures are traded in both COMEX and eCBOT. There are also mini futures contract in the eCBOT.

This article is written for www.orientfinance.com. Orient Financial Brokers (OFB) S.L.P. conducts brokerage in Foreign Exchange, Futures, and Commodities in the Middle East. OFB offers 24 hours internet on-line trading service to deal in thousands of financial instruments.

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