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 Nations around the world embraced gold and silver as a store of
wealth and a medium of international exchange. Individuals have sought
to possess precious metals as insurance against the day-to-day
uncertainties of paper money. Gold,
silver, platinum and palladium constitute the majority of trading in precious
metals.
Trading
in precious metal futures market or spot market in a speculative manner
provides an important
alternative to traditional means of
investing in precious metals such as gold bullion, coins, and mining
stocks, and where substantial profits, as well as losses can be made.
Trading contracts in precious metals also provide valuable trading tools for commercial producers and the users of these
metals.
Precious metals are traded on the futures and spot markets in
contracts (a contract of gold is 100oz while a contract of silver is
5000oz). On the spot market, precious metals are usually bought or sold
based on a value date of 48 hours which can be rolled over on a daily
basis thereafter. Trading on the futures market is done by buying or
selling precious metal for a specific settlement date in the future, for
example July Gold, i.e. buying a gold contract say in March for July
settlement.
Precious Metals Trading Model
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