Throughout the history of mankind gold has been coveted for its unique characteristics of rarity, beauty, and near indestructibility. Nations have embraced gold as a store of wealth and a medium of international exchange and individuals have sought to possess gold as insurance against the day-to-day inflationary uncertainties of paper money. Gold futures and gold options are sometimes used as an inflationary hedge.

The United States first assigned a formal monetary role for gold in 1792, when Congress put the nation's currency on a bimetallic standard, backing it with gold and silver.

During the Great Depression of the 1930s, most nations were forced to sever their currency from gold in an attempt to stabilize their economies.

Gold formally reentered the world's monetary system in 1944, when the Bretton Woods agreement fixed all the world's paper currencies in relation to the U.S. dollar which in turn was tied to gold. The agreement was in force until 1971, when President Nixon effectively cancelled it by ending the convertibility of the dollar into gold.

Gold is a vital industrial commodity. It is an excellent conductor of electricity, is extremely resistant to corrosion, and is one of the most chemically stable of the elements, making it critically important in electronics and other high-tech applications.

A broad cross-section of companies in the gold industry, from mining companies to fabricators of finished products, can use the COMEX Division gold future and gold options contracts to hedge their price risk. Furthermore, gold has traditionally had a role in investment strategies, and gold futures and gold options can be found in investors' portfolios.

Gold future contracts opened for trading in the United States on December 31, 1974, timed to coincide with the lifting of a 41-year ban on the private ownership of gold by U.S. citizens.

Today, gold future prices float freely in accordance with supply and demand, responding quickly to political and economic events.

Gold is an effective hedge against inflation. In addition, gold is inversely correlated to the US dollar, making it a good currency hedge. As an asset class, gold has all the advantages of being universally regarded as a currency, without what are all too often the disadvantages of being subject to the economic and monetary policies of one particular country's government.

Exchange-Based Gold Futures Trading

The New York Mercantile Exchange (NYMEX) merged with the Commodity Exchange, Inc. (COMEX) in August 1994 to become the world's largest physical commodity futures exchange. The gold future contract is one of the most liquid of the precious metal future contracts. During the September 11 terrorist attacks the COMEX was destroyed but within days the gold futures and gold options markets were trading again. This is a testament to the strength and viability of the metals future markets.

Trading is conducted through two divisions; the NYMEX division, which trades a variety of energy futures, platinum futures and options platinum and palladium futures, and the COMEX division which trades gold, silver and copper futures and options.

 Gold Futures and Gold Option Contract Specifications

Trading Unit

100 Troy ounces

Price Quotation

U.S. dollars and cents per troy ounce.

Trading Hours (All times are New York time)

Open outcry trading is conducted from 8:20 AM until 1:30 PM.

After-hours electronic trading begins at 2:00 PM on Mondays through Fridays and concludes at 8:00 AM the following day, with the exception of Friday's session which concludes at 4:30 PM that same day. On Sundays, the session begins at 7:00 PM and concludes at 8:00 AM the following day.

Trading Months

Trading is conducted for delivery during the current calendar month; the next two calendar months; any February, April, August, and October falling within a 23-month period; and any June and December falling within a 60-month period beginning with the current month.

Minimum Price Fluctuation

$0.10 (10¢) per troy ounce ($10.00 per contract).

Maximum Daily Price Fluctuation

Initial price limit, based upon the preceding day's settlement price, is $75.00 per ounce. Two minutes after either of the two most active months trades at the limit, trades in all months of futures and options will cease for a 15-minute period.

Last Trading Day

Trading terminates at the close of business on the third to last business day of the maturing delivery month.

Delivery

Gold delivered against the gold futures contract must bear a serial number and identifying stamp of a refiner approved and listed by the Exchange. Delivery must be made from a depository licensed by the Exchange.

Delivery Period

The first delivery day is the first business day of the delivery month; the last delivery day is the last business day of the delivery month.

Exchange of Futures for Physicals (EFP)

The buyer or seller may exchange a gold futures position for a physical position of equal quantity. EFPs may be used to either initiate or liquidate a futures position.

Grade and Quality Specifications

In fulfillment of each gold futures contract, the seller must deliver 100 troy ounces (±5%) of refined gold, assaying not less than .995 fineness, cast either in one bar or in three one-kilogram bars, and bearing a serial number and identifying stamp of a refiner approved and listed by the Exchange. A list of approved refiners and assayers is available from the Exchange upon request.

Position Accountability Levels and Limits

Any one month/all months: 6,000 net futures equivalent, but not to exceed 3,000 in the spot month.

Margin Requirements

Margins are required for open gold futures positions.

Trading Symbol

GC