GOLD & SILVER FUTURES (GC, SI)
Plain English
Gold is a safe-haven asset — people flock to it during uncertainty, inflation fears, and dollar weakness. Silver behaves like gold but is more volatile and has industrial demand too. Both trade on COMEX (part of CME Group). Gold is the most popular precious metals futures.
Going deeper
Gold futures (GC): 100 troy ounces, tick = $0.10/troy oz = $10/contract. Silver futures (SI): 5,000 troy ounces, tick = $0.005/troy oz = $25/contract. Key gold drivers: USD strength/weakness (inverse relationship — weak dollar = higher gold), real interest rates (gold pays no yield, so higher real rates make it less attractive), inflation expectations, central bank gold purchases, and geopolitical uncertainty. Gold/Silver ratio (how many ounces of silver equals one ounce of gold) is a classic spread trade — historically ranges from 50 to 90. Mini Gold (QO) and Micro Gold (MGC) allow smaller participation. Gold ETFs (GLD, IAU) offer equity market alternative.
Examples
Real Rates and Gold
In 2020, the Fed cut rates to zero and real rates (nominal minus inflation) went deeply negative. Gold surged from $1,500 to $2,089 — a new all-time high. When real rates are negative, the opportunity cost of holding gold (which pays nothing) disappears.
Gold-Silver Ratio Trade
Gold/Silver ratio reaches 90 — 90 oz silver = 1 oz gold (historically extreme). A spread trader buys silver futures and shorts gold futures. When the ratio reverts to 70, silver has outperformed gold — the spread produces profit regardless of which direction the metals move.