COMEX Gold – Fool-Proof Concerns By Way Of The Professional Abstract
January 9th, 2012
COMEX Gold Offering The Leverage Advantage Unlike some gold investments, COMEX gold contracts feature built-in leverage. The Exchange promulgates minimum margin requirements. At times, the margin requirement might be just a few percent of the notional value of the underlying contract. What’s nice about the margin for futures contracts is that is merely a deposit made to show one’s ability to perform on the contract. In other words, you simply have to demonstrate that you can financially handle the daily volatility. The margin balance is screened and account balances are modified daily to reflect market conditions. While the margin requirements may change, you won’t have to borrow money from your broker or pay fees for the margin use. Strategic use of gold futures can lend up to 25-fold leverage. This is something completely unknown to an “investment†as basic as a passbook type of account, like the Public Bank Gold Investment, where the account is intended to simply mirror the move in bullion. COMEX Gold Cost Comparisons Gold is not an income-producing asset. As a result, some gold investments require that actual physical bullion be sold to cover the administrative fees of the given gold investment. A nice feature of gold futures is the ability to buy and sell in a way that skips managerial expenses. These futures can be used for investment purposes, rather than as a means to actually obtain physical metal, to play the arbitrage vis a vis gold bullion. Only a brokerage cost incurred to roll contracts forward would be in play. Taking physical delivery can be more economically efficient through futures as well. For starters, you can obtain just 100 ounces of bullion direct from the warehouse. By comparison, some vehicles would require multiples of that. The metal can be obtained through an exchange-licensed depository. While insurance and shipping costs can occur in any event of physical delivery, a streamlined approach in smaller quantities opens the door to physical delivery for more investors who want all options available. Another aspect of cost involving COMEX gold has to do with taxation. Some investors find that there are tax benefits to investing in futures over other gold investment vehicles. Obviously, individual tax advice is beyond the scope of this writing. However, it’s important to be aware of all angles to play your gold investments for maximum profits. It’s worth exploring the tax treatment of various investments relative to COMEX gold prior to investing.