Posts Tagged ‘Gold Futures contract’

IMF Sells 200 Tonnes of Gold to RBI

Gold-surges-alltime-high

IMF Sells 200 Tonnes of Gold to RBI

The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India (RBI) for $6.7 billion in order to shore up the Fund’s finances to enable it to boost the concessional lending to the world’s poorest countries.

This sale of gold to India represents almost half of 403.3 tonnes of total sales volume, which was approved by the IMF Executive Board September 18.

IMF said that the transaction involved daily sales, which were phased over a period of two-week during October 19-30.

The price at which the each daily sale was conducted was set on the basis of market prices prevailing that day, it said.

This deal will increase India’s gold holdings to the tenth largest among the Central banks.

πŸ™‚

“I strongly welcome this transaction with the Reserve Bank of India,” Managing Director Dominique Strauss-Kahn stated.

“This transaction is an important step toward achieving the objectives of the IMF”s limited gold sales programme, which are to help put the Fund”s finances on a sound long-term footing and enable us to step up much-needed concessional lending to the poorest countries.”

πŸ™‚

The IMF, which currently holds 3,217 tonnes of gold, is the third-largest official holder of the precious metal after the US and Germany.


The IMF has made gold sales a key element of its new income model aimed at lowering its dependence on lending revenue to cover expenses.


Under the Fund’s Articles of Agreement, all gold sales must be conducted at prices based on market prices, including direct sales to official holders as in the case of this transaction with India, the IMF said.


The Group of 20 key developed and developing countries, at their April summit in London, agreed the gold sales should allow the IMF to offer favourable conditions on loans to the poorest countries.


πŸ™‚

income model

Know the Basics of Commodity Trading :) Part 2

commodity-trade

Hello Friends,yesterday we discussed about the importance and need for Commodity Trading.

Now its time to understand and know that how can we do commodity trading, what is the process for that and how commodity trading works

πŸ™‚

Here we go with first question of the topic for the day πŸ™‚

How do you do commodity Trading?

When you buy a Gold Futures contract, you undertake to do three things.

1. Buy the amount of gold specified in the contract.

2. Buy it at the price specified in the contract.

3. Buy it on the expiry of the contract.

This could be after one month, two months, three months and so on.

Of course, if you sell the Gold Futures contract before it expires, then you don’t have to worry about actually buying the gold.

πŸ™‚

Let’s say you buy the Gold Future contract at say Rs 15000 per 10 gm.

Your hunch comes true and the gold prices rally to Rs 16000 per 10 gm.

You can sell the Gold Futures any time before expiry of the contract.

Gold and other commodity futures prices are quoted on the commodity exchanges in exactly the same way in which stock prices or stock futures prices are quoted on a daily basis in the stock markets.

πŸ™‚

Now let us see How Commodity Trading works?

They work just like stock futures :).

When you buy a Futures, you don’t have to pay the entire amount, just a fixed percentage of the cost.

This is known as the margin.

Let’s say you are buying a Gold Futures contract.
The minimum contract size for a gold future is 100 gms.
100 gms of gold may be worth Rs 72,000.

The margin for gold set by MCX is 3.5%.
So you only end up paying Rs 2,520.

πŸ™‚

The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.

So you bought the Gold Futures contract when it was Rs 72,000 per 100 gms.

The next day, the price of gold rose to Rs 73,000 per 100 gms.

Rs 1,000 (Rs 73,000 – Rs 72,000) will be credited to your account.

The following day, the price dips to Rs 72,500.

Rs 500 will get debited from your account (Rs 73,000 – Rs 72,500).

πŸ™‚

Things You need to know about Commodities Trading πŸ™‚

Compared to stocks, trading in commodities is much cheaper, because margins are much lower than in stock futures.

Brokerage is low for commodity futures.
It ranges from 0.05% to 0.12%.

Because of this, commodity futures are a speculator’s paradise.

πŸ™‚

If you are a hard-core trader who follows the technical charts and do not really care what you trade, and if you are nimble and savvy, then commodity futures could be another asset class that you would be interested in.

The advantages in this line is that there are no balance sheets, no complicated financial statements.

All you need to do is follow the supply and demand position of the commodities you trade in very closely.

πŸ™‚

Visit the commodities trading exchanges – NCDEX,NMCE and MCX – to find out which commodities are offered for trading, their contract size and other criterias.

You will have to get hold of a commodities broker but that should not be a problem.

There are lots of brokers that offer commodity trading these days.

πŸ™‚

But, it would be wise to avoid commodity trading if you are a rookie or beginner.

A much better move would be always to initially trade in stock futures before opting for commodity futures.

πŸ™‚

Just like stock futures (Read How to trade in Futures to understand how futures work).

When you buy a Futures, you don’t have to pay the entire amount, just a fixed percentage of the cost. This is known as the margin.

Let’s say you are buying a Gold Futures contract. The minimum contract size for a gold future is 100 gms. 100 gms of gold may be worth Rs 72,000.

The margin for gold set by MCX is 3.5%. So you only end up paying Rs 2,520.

The low margin means that you can buy futures representing a large amount of gold by paying only a fraction of the price.

So you bought the Gold Futures contract when it was Rs 72,000 per 100 gms.

The next day, the price of gold rose to Rs 73,000 per 100 gms.

Rs 1,000 (Rs 73,000 – Rs 72,000) will be credited to your account.

The following day, the price dips to Rs 72,500.

Rs 500 will get debited from your account (Rs 73,000 – Rs 72,500).