GOLD

Lot size: One contract represents 1 kilogram.

Tick size: Minimum price movement is ₹1 per 10 grams.

Quotation: Prices are quoted in rupees per 10 grams.

Expiry: Contracts expire on the 5th day of the contract expiry month. If that day is a holiday, the preceding working day. New contracts launch on the 16th day of the launch month.

Trading hours: The GOLD futures market operates Monday through Friday, with trading hours running from 9:00 AM to 11:30 PM. During US daylight saving time, trading extends to 11:55 PM.

Daily Price Limit (DPL): The initial slab is 3%. If breached, relaxation is allowed up to 6% without any cooling off period. Should the 6% threshold also be broken, trading will pause for a 15-minute cooling off period, after which the daily price limit is widened to 9%. If the price movement in international markets exceeds 9%, the same may be further relaxed in increments of 3%.

Initial margin: Minimum 6% or SPAN-based, whichever is higher. Extreme loss margin is 1%.

Open Interest (OI): Total outstanding contracts. Rising OI with rising price indicates fresh longs. Rising OI with falling price indicates fresh shorts.

Position limits: Individual clients can hold up to 5 metric tonnes for all Gold contracts combined, or 5% of market-wide OI, whichever is higher. Members can hold 50 metric tonnes or 20% of market-wide OI, whichever is higher.

Maximum order size: 10 kilograms per order.

Delivery: Compulsory delivery at expiry. The primary delivery centre is Ahmedabad. Additional centres are Mumbai and New Delhi. The quality standard is 995 purity. Seller receives a premium for 999 purity.

Macro participation without contract: Macro drivers such as central bank policy, currency movements, and geopolitical events all impact gold prices. Futures allow investors to be exposed to these price changes without dealing in the actual metal itself or dealing with the complexities of sourcing or storing it.

Leverage through margin: The margin call is only required for futures. This results in a reduced investment in the market. It also represents a potential loss of the margin and more if not managed properly.

Hedging utility for jewellers and bullion dealers: Companies that have gold price risk exposure can use MCX futures to manage their input costs. The contract has been designed to help with this kind of operational hedging since it's actually compulsory to deliver at the expiry date.

Transparent, regulated infrastructure: MCX is an exchange regulated by SEBI. The prices are displayed publicly. Settlement is conducted under a set of rules. Clearing corporation helps to reduce counterparty risk.

Physical delivery option: Compulsory delivery at expiry ensures convergence between futures and spot prices. Sellers can deliver 995 purity gold and receive a premium for 999 purity. Buyers receive LBMA-approved bars with quality certification.

Portfolio diversification: Gold prices often move inversely to equities and bonds. Adding GOLD futures to a portfolio reduces overall volatility and provides a hedge against systemic risk.

Inflation protection: Gold historically preserves purchasing power during periods of currency debasement and rising consumer prices. Futures offer a liquid way to position for this macro outcome.

Arbitrage opportunities between exchanges: Price differences between MCX, London, and New York create short-term arbitrage windows for traders with access to multiple markets and currency hedging capability.

Directional long or short: Long (buy) or short (sell) the futures in anticipation of a price increase or a price fall. The simplest approach and the one most retail participants begin with. Risk management in terms of position size relative to margin is critical.

Month-to-month spread: Buying one expiry month while simultaneously selling another. Profit or loss is based on the movement of the difference between the two months. Spreads generally require a lower margin and carry lower volatility than outright positions.

Jeweller or dealer hedge: A jeweller holding physical gold can sell futures to secure a selling price. If spot prices rise, the physical gain offsets the futures loss. If they fall, the futures profit offsets the physical loss.

Arbitrage between MCX and global markets: If the price of the MCX differs considerably from the London/New York price after taking currency and duty costs into consideration, a reversion trade could be considered. This necessitates knowledge of the market and when the imports are moving.

Track US Federal Reserve policy: The dollar and, by extension, gold are influenced by rate decisions and forward guidance. Keep an eye out for FOMC statements, dot plots, and Powell press conferences.

Watch USD/INR alongside the London spot: MCX prices are not linked to any movement of gold in the world, but are influenced by the rupee dollar rate. A weaker rupee will help the domestic prices even as London rates remain flat.

Factor in Indian festival demand: The physical demand is boosted by the wedding season and the end of the year Diwali buying spree in the last quarter. This can push MCX premiums above the London prices.

Monitor the central bank buying reports: The World Gold Council provides quarterly data on the nations that are accumulating. Long-term price floors are based on sustained buying.

Respect the margin cycle: The Mark to Market feature is implemented on a daily basis for MCX. Gold can gap up on geopolitical events or surprises from central banks. Margin-minimum sizing is not as strong as position sizing that considers adverse moves.

Look at several chart time frames: There is a possibility that a trend that can be seen on the daily chart will not appear on the hourly chart. Align both prior to entering a position.

Square off before expiry if you do not want delivery: Most retail traders do not intend to take or give physical delivery. If you do not have to deal with any complications, you should exit well before the final trading day.

Avoid overleveraging: Taking a big position with only a small margin is not a good idea. Limit risk per trade to a certain percentage of ones investment capital.