New micro gold futures contracts

Micro gold futures contracts on CME’s electronic trading exchange are going to be a new way to trade gold. These contracts are traded precisely the same way as their parent gold futures contract and mini futures contract only they are 1/10^th the contract size to the full futures contract which is equivalent to 10 troy ounces. With a margin requirement of only approximately $574 there will be many more traders able to trade gold more frequently. Although the exchange has not stated the margin requirement, they require $5,740 for full gold futures which is ten times $574. What’s more trading fees will be reduced for trading micro contracts.  If you are an individual trader you may want to take advantage of this electronic product offering. The root symbol for micro gold is MGC. Settlement prices will be exactly the same as the full futures contract and it is also a great way to complement trading of your mini and full gold contracts by scaling in and out.

Physical delivery

There will be no physical delivery of micro gold futures as there are no 10 oz gold bars. However, you will accumulate certificates of ownership that can be redeemed for receipt of gold bars. Once you have acquired 10 certificates you will be able to redeem physical delivery of one gold bar which is 100 troy ounces. 

Keep in mind that there are mini gold futures contracts already which are half the size of full futures contracts. There are also different ways to acquire physical gold.

Liquidity

Currently average liquidity for gold futures equals 104,700 contracts a day, equivalent to 10.47 million ounces a day. Whereas, gold exchange traded fund (symbol: GLD) averages 14.32 million shares a day, equivalent to only 1.432 ounces a day.

Leverage

Compared to gold ETFs micro gold futures will still be better leveraged with a $10 price change in COMEX gold equaling a 20% return on investment on a $500 position. Conversely, the gold ETF will experience an 8% return on investment. For each $1 change in COMEX gold these micro futures will fluctuate in price by $10 represented by the fact that you are controlling 10 oz of gold.

For more info about COMEX gold and the unveiling of the new micro futures contracts go to the CME Group website.