Micro Gold Futures
Posted By:- Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
Micro Gold Futures: An Overview
Micro gold futures contracts are useful in bearish equity environments, where gold is showing its strength. It can serve as a portfolio stabilizer when markets are stressed. While the metal is not always immune to selling pressure, like when it sold off when the world went into “lockdown mode” in March 2020, it can outperform typical risk assets in these market environments.
With micro gold futures you have a greater ability to pinpoint scale, since the notional value is price times quantity, or 1890.00/oz X 10 Ounces. You can use them along side the 100 oz gold contract to control $250,000.00 of the metal. Here’s a great breakdown example of what that might mean for a trader like you:
- $1890 x 100oz Full Size Gold Contract = $189,000.00 on Notional Value plus $1890 x 30 ounces ( 3 Micro Gold Futures contracts) = $56,700 for a total $245,700.00 Notional Value.
- The Margin required for 1 Micro Gold Futures Contract is $660.00 currently and the Full Size Margin at $6600.00 currently, means the good faith deposit to control $245,700.00 of Gold is only $8580.00.
Gold contracts provide global price discovery and opportunities for portfolio diversification by presenting an alternative to gold bullion, coins, and mining stock investments. Gold also offers ongoing trading opportunities, as gold prices respond quickly to political and economic events. Micro gold futures is 1/10th the size of the standard 100 troy ounce contract but, price action nearly mirrors it’s big brother 100% of the time.
Micro Gold Futures & Standard Gold Futures: A Few Current Technical and Fundamental Thoughts
- Gold has been range-bound since April of 2020- $1690.00/oz low and $2089.00 high.
- This past month has seen the metal rally above it’s midpoint at $1889.50 by a small margin.
- The market is keeping an eye on a similar set of factors as has been the case for the last several months, namely inflation, the Fed taper, and the timing of “lift off” in US nominal rates.
- January 2022 saw some increases in managed money net length, perhaps as the headwinds for gold may have been factored into these price levels.
- February has started very positively, with gold posting gains after key events (FOMC and NFP) and now sitting just below a key resistance level of 1919 USD/oz.
Get More Insights and Sign Up for A Free Demo Here: https://www.cannontrading.com/software/e-futures-international?q
Author: John Thorpe, Senior Broker at Cannon Trading Company
Important: Trading commodity futures and options involves a substantial risk of loss. Therefore, recommendations contained in this letter are of opinion only and do not guarantee any profits. There is not an actual account trading these recommendations and past performances are not necessarily indicative of future results.