Safe Online Gold Trading with Futures

Safe Online Gold Trading with Futures

What is Online Gold Trading?

Online gold trading is the process of buying and selling gold online without the physical transfer of gold, but the settlement of transactions in cash. However, in some cases, transactions can be settled by delivering physical gold to the buyer in accordance with the terms of the contract for the traded gold asset.

Some of the product options for online gold trading include spot contracts (like GOLDUD) and gold futures. What's the difference between the two? We will also discuss in this article.

Learn about the gold gold necklace

If until now trading gold through futures products was available in US dollars and gold ounces, now you can trade gold in rupees and fines!

Of course, exchange rate conversions and the weight of gold are no longer an obstacle, are they? As one variant of the GOFX gold product, the GOLDGR futures contract is designed to serve Indonesians in financial instruments with capabilities and dynamic transactions at Rs per gram.

GOLDGR is a type of gold gram futures contract that caters to the needs of Indonesians who are used to trading grams rather than ounces.

In line with the gold needs of Indonesian investors, GOLDGR gold futures contracts are traded at rupees per gram. This category is expected to make it easier for Indonesian gold investors to deal with gold futures contracts.

What are the advantages of gold futures contracts?

portfolio diversification

Gold futures contracts classified as derivatives (derivatives) can be a way to diversify investment portfolios. In addition to the core characteristics of gold, which tend to remain stable in the face of crises, gold futures contracts can provide a different market opportunity than other gold assets.

A new chance to win

Gold futures contracts allow investors to actively manage profits by looking for hedging funds. With a well-thought-out strategy, investors can benefit from the movement of gold prices in the market.

protection

GOFX gold futures contracts are traded directly on the ICDX exchange, which is controlled by the Commodity Futures Trading Regulatory Agency (CoFTRA) under the control of the Department of Commerce. All transactions are also handled by the Indonesian Clearing House (ICH), which is integrated with ICDX. All GOFX products, including the GOLDGR contract, are only available to ICDX member brokers registered with CoFTRA.

Flexibility

If you just want to make a profit, you do not need to worry about the physical storage of gold, because transactions can be settled in cash without the need for physical delivery.

Gold Futures Surgery

The basis for the GOLDGR gold futures contract is 999.9 purity gold. Gold content generally refers to gold classified as precious metals (LM) rather than jewelry.

Why is the contract based on precious metals?

Because LM is of the highest purity and is used as an investment vehicle, not as jewelry that can undermine its value. Another reason is that LM at this level is the London Bullion Market Association (LBMA) standard.

The unit of this contract may be too large for some investors, which is 100 grams per lot or the equivalent of Rs 85,000,000. However, this product is in the form of a forward contract and a margin of about 4% of the total transaction value is used for transactions in the coming months. Thus, the money required to buy one batch of gold (100 grams of gold) is only 3,400,000 Indonesian rupees.

This cost, compared to buying physical gold, can be less than 5 grams, so with this GOLDGR contract, money that you have about 5 grams of gold in current value can get a 100 grams gold contract.

Difference between GOLDGR and GOLDUD contracts

In addition to the GOLDGR contract, GOFX has previously launched the GOLDUD Gold contract. What is the difference?

category

GOLDUD is a contract to roll gold daily in US dollars in troy ounces, while GOLDGR uses rupees and fines.

Time interval

GOLDUD contracts will continue to appear every day and will be closed when market participants open an opposite position or close a position. While in GOLDGR, each free market participant opens positions according to their own trading strategy, whether in the remaining months from delivery (futures month) to the next 12 months or during the spot month (delivery month).

price

Transactions under the GOLDUD contract can be made only at one price - the spot price. Meanwhile, the GOLDGR contract price varies.

One of the characteristics of futures trading (GOLDGR) is that there are differences in the transactions that occur in the month of the futures contract and the delivery month. For transactions in the futures month, a lower margin rate will apply, which is INR 1,600,000 or less than 4% of the total transaction value. Meanwhile, in the month of delivery, the accrued margin will be higher and amount to 30% of the contract value, or about 24,750,000 rupees per contract (301 SEB).

The increase in margin occurred at the beginning of the delivery month. The raise is intended to enable market participants with open positions in futures contracts to prepare their funds prior to delivery day, for which funds must ultimately be provided equal to the value of the transactions made.

In a GOLDGR futures contract, the settlement mechanism can be implemented in several ways, including a cash settlement mechanism and a physical delivery mechanism.

In the cash settlement mechanism, each open position will be automatically closed before the trading day, and the loss and profit from the open position will be calculated against the settlement price. While in the physical delivery mechanism, the party wishing to carry out the physical delivery is obliged to notify the exchange that it is ready to physically deliver or receive gold.

In a real gold settlement mechanism, delivery can only occur if the two parties are willing to give and receive physical gold. If only one party wishes to submit and no one wishes to accept, the forward contract will be settled using the cash settlement method on the last trading day.

Meanwhile, if there are multiple parties intending to make physical delivery, delivery and receipt will be distributed at random at the end of each trading day in the spot month. If there are items that were not distributed after distribution using the random method, then cash will be settled.