Commodity Markets

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Gold

Now that we know how to use different commodity trading strategies, let us discuss a few popular commodities that are classified as Bullions and are popularly traded on the commodity exchanges—starting off with Gold which is one of the oldest precious metals known to humans. 

 

Gold is used as a commodity, a currency, and also as an investment vehicle. It is also the most popular bullion commodity that trades in the markets.

 

The above price mentioned is the last traded price for 10 grams of gold. Since the lot size is 1 kg, the contract value is –

1000* 50,974 =₹50,974,000.

 

 

Factors Affecting Gold:

 

1.Demand supply mismatch.

2.Inflation – Positive correlation with gold prices 

3.Interest rates – Negative correlation with gold prices.

4.Currency – US Dollar and gold have a negative correlation.

5.Crude Oil Prices – Positive correlation with gold prices.

6.Value of gold imported into India from 2011 -2020.


 

7.Global Gold Reserves:


 

Top producers of Gold:

 

 

Other factors affecting gold prices are:

 

 

Trading & Conversion:
  • In the U.S., gold futures are primarily traded on the New York Commodities Exchange and Euronext Life
  • In India, gold futures are traded on the National Commodity and Derivatives Exchange and Multi Commodity Exchange
  • The product symbol for gold futures is GC, and it is traded in a standard contract size of100 troy ounces
  • The settlement of gold contracts is through delivery.
  • The minimum fluctuation allowed in price is $0.10 per troy ounce, and it is held to a minimum of 995 fineness quality specification.
  • Unit in which Comex Gold is quoted: USD / troy ounce.
  • Conversion factor: 1 gram = 0.0322 troy ounce.
  • Conversion Calculation: Comex Gold price * 0.0322 * INR Currency.
  • Example: Comex Gold future stands at 926.40 and INR Currency is at 49.5950, the price of 1 gram = ₹926.4 * 0.0322 * 49.5950
    = ₹1477.16 / gram
    = ₹14771.60 / 10 gram

Gold is a commodity which is very actively traded on the MCX. Gold is very liquid, with an average daily volume of 1276 lots in the MCX.

 

Gold comes in 3 different variants:

 

1.Gold Guinea:

  • Symbol: GOLDGUINEA
  • Trading unit: 8 grams
  • Maximum order size: 10 kg
  • Tick Size: Re.1 per 8 grams

2.Gold Mini:

  • Symbol: GOLDM
  • Trading unit: 100 grams
  • Maximum order size: 10 kg
  • Tick Size: Re.1 per 10 grams

3.Gold Petal:

  • Symbol: GOLDPETAL
  • Trading unit: 1 gram
  • Maximum order size: 10 kg
  • Tick Size: Re.1 per 1 gram

All the gold contracts mentioned above trade on MCX. 

 

The timing of the exchange is Monday to Friday: 09:00 A.M. to 11:30 P.M.

 

All kinds of gold contacts which are offered differ in terms of price, liquidity, lot size, etc.

 

The primary gold is the best contract to trade-in, but the margin required for executing that contract is the highest.

 

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