Gold & Silver
Example #1. Buy Gold with Stocks (long position)
Opening position
On May 3rd of 2009, the "i-Shares - ETF Physical Gold" ETF shares are trading at 9.25 (bid) / 9.28 (ask) USD per share. These shares are listed in the New York Stock Exchange-ARCA. This ETF tracks Spot Gold prices in USD. The spot price for gold is at 900 USD per ounce.
An investor decides to open a long position on Gold, since he/she expects a gold price rise. Therefore, he/she decides to buy 10,000 shares of the "i-Shares - ETF Physical Gold" ETF, which means an investment of 92,800 USD (10,000 shares x 9.28 USD per share).
Closing position
Imagine that on July 28th of 2009, the Spot Gold price per ounce is at 940 USD and the ETF "i-Shares - ETF Physical Gold" is trading at 9.66 (bid) / 9.69 (ask) USD per share. The ETF price changed in same proportion as Spot Gold price, i.e. went up 4.4%.
Trade summary
Example #2. Buy Gold with CFDs (long position)
Imagine that your account currency is in Euros (€) and that CFD cross XAUEUR is trading at 499 (bid) / 500 (ask) Euros for one ounce of gold. You expect that Gold price in Euros will go up (Note: XAU stands for 1 troy ounce of gold, approximately 31 grams; EUR- stands for Euros).
Opening position
You decide to open a long position on Gold, therefore you buy 200 ounces of Gold, which means an investment of 100,000 Euros (500 Euros per ounce x 200 ounces).
In order to open this position, you need to make a 4,000 Euro deposit that corresponds to 100,000 € x 4 %, which is the required margin for this operation.
Closing position
45 days later, you see that your predictions were correct, Gold went up and the cross XAUEUR is now trading at 550 (bid) / 551 (ask). You decide to close your position by selling 200 ounces of Gold at 550 Euros per ounce. Your total profit amounts to [200 x (550-500) = 10,000)] 10,000 Euros (EUR).
In summary, CFDs allows you to multiply your investment: with only 4,000 Euros you had an exposure of 100,000 Euros, corresponding to 200 ounces of gold. In this trade you obtained a 150% return [(10. 000 ÷ 4,000) - 1].
Trade Summary
Example #3. Buy Gold with Futures (long position)
A Futures contract named "NY mini Gold, Aug 2009" is listed in the Chicago Futures Exchange, with Gold as the underlying asset. This contract presents the following characteristics:
Contract size: 33.2 ounce of gold
Contract currency: USD
Required margin:1,800 USD
Maintenance margin: 1,333 USD
Contract expiration: 28-07-2009
Opening position
On May 3rd, an ounce of gold is trading at 903 USD (US Dollars) in the Spot market. The contract "NY mini Gold, Aug 2009" for the same date and time is trading at 896 (bid) / 910 (ask) USD per ounce of gold.
An investor expects a rise in the price of Gold. Therefore he/she decides to open a long position on that date by buying three contracts at 910 USD per ounce of gold each. Therefore, his exposure totals 90,636 (3 contracts x 33.2 ounces x USD 910) USD.
Closing position
The investor decides to keep his position until its expiration on July 28th of 2009. As expected, Gold spot price went up and is trading at USD 940 per ounce. The contract "NY mini Gold, Aug 2009" for the same date and time is trading at 937 (bid) / 944 (ask) USD per ounce. At the expiration date, the Futures contract is closed and profits are credited to investor, in this example 2,689 USD (US Dollars).
Trade summary
