Gold Futures Analysis

Taking a closer look at gold futures analysis, price and prediction, the CME gold futures contract (GC) is one of the most actively traded on the exchange marketplace. Each contract represents 100 troy ounces (see contract for specs) with a tick value of $10 or .10 per ounce. The CME continues to provide accessibility for smaller traders by offering contract sizes such as the Micro gold futures (MGC). Standing at 1/10^th the size of the aforementioned, with a tick value of $1, the MGC provides accessibility to those who may size their positions incrementally. Both contracts are actively traded, providing good liquidity to market participants.

Whether the standard applies or not, gold continues to be a popular choice for investors and traders alike. In gold futures analysis, the market participants of gold futures are diverse. People across the world hedging, speculating, and doing business with the hope of a better future. Though volatile at times, gold has a record of recovery after periods of price adversity. Inflationary concerns and looming world conflict have once again sent gold futures careening toward all-time highs. In a time where Bitcoin and other cryptos continue to draw attention from those pursuing extraordinary returns, metal investors seem to have enjoyed relative stability and growth since the COVID-19 crisis. Gold looks poised to once again push upward as investors and traders seek financial solace from the anticipated Russia/Ukraine military conflict.

From a technical analysis perspective, gold appears to be testing the upper side of a price consolidation that’s lasted for nearly a year. Assuming continued strength, one could argue that gold will top $2,000 an ounce this year and possibly make a new all-time high. If conflict materializes and broad-market weakness presents, the negative beta correlation of gold to the S&P500 may create buying pressure.

Price & Prediction

Taking this into consideration, it’s important for traders like you to brace for multiple scenarios when doing a gold futures analysis, with price and prediction. All signs point upward for gold, which means it can be useful to reflect and prepare for something less obvious. Ironically, like a punishment for the preemptive celebration of traders and investors, when things seem a shoo-in, adversity reveals itself. Make a plan for when things don’t go your way. Gold may retest $2,000/ounce and fall back into price consolidation, or reverse and press downward. Any number of scenarios could play out, and only time will tell. You must consider these and more factors when looking at gold futures analysis, price and prediction. Those prepared with reactive risk management solutions, active at finding low risk/high reward trading opportunities will succeed.

Within the gold futures, speculative traders skilled in order flow/tape reading should find intraday opportunities. While swing traders and portfolio-style risk managers may utilize gold futures to hedge or manage their broad market exposure. Directionally focused swing/position trading continues to be viable option for disciplined traders as well. The critical element to success tends to be risk management, regardless of trading style.

Nowadays cryptocurrency has taken the world by storm. Outsized returns and the hope of instant success draw a crowd. It seems an era of new-school vs. old-school, but caution is advised. For millennia our species has valued gold. Bitcoin was created in 2009. It can be argued that the cryptocurrency market is still in its initial price discovery phase. Please consider that strong value can be found outside of what’s considered trendy or popular. It’s ironic that gold seems less glamorous these days. Be sure to do your due diligence, and remember what they say about all that glitters….Happy Trading!

Get More Insights and Sign Up for A Free Demo Here: https://www.cannontrading.com/software/e-futures-international?q

Author: Josh Meyers, 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.

What Are Gold Futures?

Like all commodity futures, gold futures are derivative financial contracts.  A derivative is a type of contract whose value is determined by or derived from the value of another asset.  In the case of gold futures contracts, the other asset is an amount of gold.  The major gold futures contracts traded on the CME Group’s COMEX Exchange are derived from the value of 100 ounces, 50 ounces, and 10 ounces of gold with a rated fineness of 995. What this means is the underlying metal’s purity is at least 99.5% or more.  In turn, because of the reflective relationship between gold futures contracts and gold itself, understandably the price of a futures contract is valued similarly to and fluctuates with the price of gold.

The Marketplace Breakdown

Gold futures, such as those traded on the CME Group’s COMEX Exchange, are an efficient means for you as a trader to participate in the directional movement of the price of gold.  The exchange is essentially the marketplace where these futures are traded.  By means of electronic networks, an exchange’s market participants can be apprised of vital information like this futures contract’s current price, competing bids and offers, the number of contracts changing hands (volume), the total number of outstanding contracts (open interest), and more.  It’s also the means by which participation in the gold futures marketplace takes place.  It’s where buyers and sellers, or futures traders like you, meet.

How Do You Begin Trading This Market?

Gaining access to the gold futures market generally calls for a trading account to be opened with a registered brokerage.  It is through this arrangement that market participation is facilitated and orders to buy and sell gold futures can be placed to the exchange via an electronic trading platform – called Globex at the CME.  The exchange is responsible for the execution of trades between buyers and sellers.  This is possibly the most important function of the exchange, in that it serves as the buyer to every seller and the seller to every buyer, thus virtually eliminating credit risk for each market participant.

Get More Insights and Sign Up for A Free Demo Here: https://www.cannontrading.com/software/e-futures-international?q

Author: Mark O’Brien, 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.

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 1/10^th 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.

Trading currency futures offer the perks of a central exchange and transparency regarding the flow of orders as they come into the market. Market participants share a level playing field with volume transparency and the information they use to trade. Traders are provided with peace of mind and can unabashedly focus on improving their performance, which promotes a diverse and liquid trading environment. Confident traders in turn create liquidity in the financial markets.

Trading liquidity persists across many major USD futures currency pairs, including the Euro(6E,) Yen(6J,) British Pound(6B,) Canadian Dollar(6C,) Australian Dollar(6A,) Mexican Peso(6M,) and more. The reasonable margin requirements and competitive trading fees and commissions of the futures market make trading currency futures an attractive option for many styles and types of traders.

However, even though it’s transparent, don’t underestimate the challenge provided by the market itself. Liquidity and tight bid-ask spreads are created from voluminous markets. Importers and exporters hedging their currency risk, financial institutions conducting business, and speculators hoping to earn a living, are all hoping for a better future. This creates a competitive atmosphere with participants jockeying for the best position.  It’s definitely an environment to prepare for carefully.

The exchange continues to provide accessibility for traders of many different capital amounts. Trading at 1/10^th the size of the larger contract, the E-Micro FX Futures provides a smaller alternative than their larger relative. Although the fees and commissions tend to scale more economically for the larger sized contracts, the micro contracts allow traders more flexibility to size their positions. In addition, they also provide opportunity for creative hedging, spreads, and pairs trading with the bigger contract sizes. A savvy trader may find themselves geographically tracking interest rates.

Trading Currency Futures: Here Are Some Useful Tips for Budding Traders!

1. Intimately Learn Your Currency Instrument

It’s common for traders to have a favorite instrument. It can be argued that a trader’s favorite instrument is one that they’re most familiar with. Currency futures traders tend to find niches as each pair or futures contract will have behaviors unique to itself. As technology advances and the markets continually become more efficient, instrument correlation is more obvious. Though correlated at times, the volatility, price behavior, liquidity, and volume of each instrument or currency will be unique.

• Learn one instrument until you feel comfortable with it. You might find that it’s easier to understand the price movement of other instruments once you’ve studied a single one for awhile.
• Get specific with how you perceive the price movement of your selected instrument.
• Learn your instrument’s correlation to others. Ask yourself, “how does my favorite instrument, correlate to the others throughout the market and world?”
• Watch or practice that instrument on a demo until you feel confident in explaining what you’re seeing.

2. Define Your Trading Currency Futures Plan

For novice currency futures traders, the excitement of “giving it a try” will often outpace their strategic planning phase. Most traders can remember the thrill of their first few trades. Before long, the reality of the market tends to encroach on a trader’s psyche. Beginners learn that the market is not as easy as they would’ve hoped and they wish they had been more thorough in their planning stages.

• Assess who you are as a person. Do you know your personality type? Build a trading plan around yourself and your business needs. If you’re trying to trade a strategy that doesn’t fit your personality, your results will suffer.
• Build a plan that clearly defines when you should or should not trade. If you can’t answer when you should trade, then you should study your instrument further. A desire to learn and improve can be argued as one of a trader’s defining qualities.
• Prepare for different outcomes. Traders tend to romanticize the results they seek. Trust in your plan. Currency futures trading is full of adversity, all trading is. The consistency of yourself, and your plan, is what will help you through the challenging times.

3. Execute with Discipline

It’s obvious and underutilized that a trader’s discipline will slip when it’s least expected. The best tools, plan, education, and commission structure will be of no help to an undisciplined currency trader. At the pinnacle of adversity, when asked about discipline, traders tend to smile. It’s a sensitive subject.

• Practice self-awareness and mindfulness. Ask yourself the hard questions. “Am I trading because of a good opportunity, or am I just trying to make-up for a previous trade?”
• Develop good muscle memories and rework bad ones. Sometimes traders pickup bad habits as they learn. Do your best to identify these, as well as other stress that could impact your discipline and focus.
• All traders feel emotion. Don’t let the emotion control your decisions. Trading leveraged instruments may provide you with immediate feedback and that’s not always a positive thing. The markets move quickly and it’s easy to get lost in the action. A good rule of thumb is to try and trade a size that seems boring. If you’re constantly stressed or anxious about your position, it may be too sizable.
• There’s no easy way to deal with your own challenging behavior. It’s a struggle that all traders face. The deciding factor in your success will be how effectively and confidently you manage your failures. Having discipline in all aspects of your trading creates fruitful possibilities.

Get More Insights and Sign Up for A Free Demo Here: https://www.cannontrading.com/software/e-futures-international?q

Author: Josh Meyers, 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.