Gold margin trading means that in the gold trading business, market participants do not need to allocate full funds for the traded gold, but only need to pay a certain proportion of the price according to the total amount of gold transactions as a performance guarantee for the physical delivery of gold. At present, there are both gold futures margin trading and gold spot margin trading in the world gold trading.
Gold margin trading has three main functions: the first is price discovery; The second is hedging; The third is speculative profit. Price discovery is the function of gold futures trading, and gold futures price is the future embodiment of gold spot price. Both futures margin trading and spot margin trading can achieve hedging. (Hedging is a patent of futures, and the spot does not have this feature. It may be necessary to explain the concept of gold hedging here. Gold hedging refers to the market operation mode that gold traders adopt to lock in risks or profits at the current value in order to avoid market risks brought about by uncertain changes in future gold prices. Because of its high leverage, margin trading has also become a tool for investors to speculate and make profits.
What are the characteristics of gold margin trading?
Gold margin trading is a double-edged sword. When gold users or producers need to hedge the spot to avoid market risks, they don't need to occupy a lot of money, but only need to pay a certain percentage of deposit as a guarantee for physical delivery. This trading method reduces the financial pressure of market participants, which is its advantage. The disadvantage is that it often brings great risks. If investors blindly speculate on the amount of hedging, once they make mistakes, they will incur heavy losses and even go bankrupt.
What is the difference between spot margin trading and futures margin trading?
Gold spot margin trading is represented by the London spot market, and there is no fixed trading place. As the counterparties of global market participants, the five largest gold merchants in London (Luo, Jin Baoli, Wandaji, Wanjiada and Meisi Pacific), investors only need to pay a certain percentage of spot deposit when buying gold, and the rest is similar to bank loans, so they have to pay a certain percentage of interest on a daily basis. Interest can also be interpreted as the loss of opportunity cost of gold merchants.
Gold futures margin trading, represented by the New York Mercantile Exchange and NYSE, has a fixed trading place, and the trading target is not spot gold itself, but a standardized gold trading contract, which stipulates that both parties to the transaction will deliver gold in kind at an agreed price at a certain time in the future.
Is the gold deferred settlement transaction launched by Shanghai Gold Exchange also a margin business?
This is also a margin transaction, but only for its members. This kind of margin trading is different from London spot margin trading and American futures gold margin trading. It is a spot gold transaction. Different from the spot market in London, it has a fixed trading place, only as a trading medium for investors, matching investors to trade, and the exchange itself does not participate in gold trading. Different from the American futures market, the subject matter of American gold futures is a standardized gold trading contract, while the delayed delivery of gold in Shanghai Gold Exchange is spot gold trading.
Foreign exchange margin trading,
The so-called foreign exchange margin trading means that foreign exchange dealers pay a certain margin in advance as a guarantee, and they can use a small amount of funds to conduct large transactions with a certain credit. In other words, customers get a lot of assets to trade by prepaying a certain margin to foreign exchange dealers.
However, the funds actually traded are not loans in kind. Foreign exchange margin trading is based on the principle of buying back the sold currency or selling the bought currency again, and the premise is to settle the difference (that is, the amount of foreign exchange difference profit and foreign exchange difference loss) after a series of transactions. Because it is only the settlement of price difference, customers do not need to prepare huge assets for the transaction, and only need to pay a small amount of margin in advance to conduct the transaction. Specifically, you can trade several times to dozens of times the margin.