Gold future ?

[sportstrader]

Hi I have been trading the GOld Future emini at THINKOR SWIM (TOS)

The contract was August which traded with spot (kitco.com)

Now on friday they went to DECEMBER it is 646.30 as I type -$3.00 while spot on kitco is 636 a 10 buck difference. I am new to futures and switched from trading GLD (ETF) last month when TOS started offering it. Can someone explain the price discrepency ? Thanks in advance

 

[Optionpro007]

futures prices are either more expensive or cheaper based on what the market is expecting to happen in the future....hence the word.

getting into futures without having done due diligence can be a very expensive experience. just a friendly reminder.

good luck.

 

[Nasdaq5048]

Quote from optionpro007:

futures prices are either more expensive or cheaper based on what the market is expecting to happen in the future....hence the word.

getting into futures without having done due diligence can be a very expensive experience. just a friendly reminder.

good luck.

Isnt it suppose to be cost of carry and the interest factor? The price for Dec should just be the present value of gold (cost of carry (insurance, storage) , interest paid between now and dec) and no expectation whatsoever.

 

[acronym]

As a (general) rule, spot or cash prices for overnight type positions, will attract interest or "carry" charges.
Commodity futures contracts attract no extra charges, beyond the +- rollover between contract months.


Equity futures are different again, check the exchange stuff, and read the fine print.

Gold is a great market, just do a lot of homework..

 

[jessie]

The futures price will be the spot price, plus or minus the cost of carry, interest, silo storage, etc. (whatever is appropriate to the specific market) plus or minus the market's expectation for the future as of the contract expiration date.

If the price of gold (or any) futures was just spot plus cost of carry, there would be a lockstep spot/futures price laddered by expiration, and this obviously isn't the case. This is why yield curves sometimes invert, markets go contango, old crop / new crop spreads vary, etc.
Jessie