The COMEX provides precious metals investors with a means of trading futures contracts on gold and silver among other commodities. Investors can cash in on the precious metals bull market by taking delivery of gold traded on futures markets at reduced prices.
The COMEX is a unit of the combined New York Mercantile Exchange and the Commodity Exchange Inc. The COMEX is where precious metals and futures contracts on precious metal are traded.
Futures trading is essentially betting on the future price of a commodity. Futures traders sign a contract to either buy or sell a commodity at a set time in the future. Sellers hope the agreed upon price will be higher than the market price at the contract’s expiration, buyers hope the market price will be higher than the agreed upon price at the contract’s expiration.
A big advantage of futures trading is that traders do not have to put up all the money for a contract, but are allowed to put up only a portion of the money, usually about 10 percent. This is known as trading on margin.
For folks who want to own physical gold, trading futures contracts on the COMEX allows them to take physical possession of gold at reduced rates.
When you buy futures contracts on the COMEX, you can choose to take delivery of the product on the expiration date of the contract. Most futures traders don’t do this, but if you’re interested in taking delivery on gold you’ll need to find a broker willing to do the necessary work to accomplish this.
To take delivery of a futures contract, you’ll need to wait until the expiration of the contract. (This is known among investors as taking a long term. Many other investment outfits, such as banks, take a short term, trading the contracts before their expiration date and thus manipulating the price of gold and silver.)
When it’s time to take delivery, you’ll receive a Notice of Delivery and your futures trading account will be debited for the amount of the contract.
There’s a variety of ways you can choose to take delivery of your contract. You can receive a receipt for the gold and have it stored. You can have the gold shipped to a warehouse or vault, but this can be pricey. Or you can actually pick up the gold and store it yourself.
Costs involved with trading futures contracts on the COMEX include brokers fees, but overall buying gold and silver via the COMEX has some distinct price advantages to buying gold on the direct market.
Before buying gold and silver on the COMEX, you should do your homework and research futures and futures trading. You should also consult with your financial advisor to ensure that this is the right investment tool for you.