Lesson 2: Gold Futures, the Basis and the Roll

Lesson 2 of 10 · about 8 minutes · course overview

A gold future is a promise to buy or sell 100 ounces on a set date. Its price equals spot plus the cost of carrying gold until then, and that gap, the basis, shapes everything from chart gaps to the swap on your broker account.

Fair value of a gold future

Someone who buys gold today and sells a future locks in a riskless position. They pay interest on the money (or give up interest they could have earned) and storage and insurance, and they could earn a small fee by lending the gold out. So, approximately: future = spot × (1 + (interest rate − lease rate) × days ÷ 365). With rates around 4% a year and gold near $4,000, a contract three months out sits roughly $40 above spot.

The roll

Most futures traders never take delivery. Before the delivery month they roll: sell the expiring contract and buy the next active one (gold's active months are February, April, June, August, October and December). Big funds and ETFs that hold futures roll in size, so the spread between the two months is watched closely. On continuous futures charts the roll creates a jump that is not a real price move, which is why backtests on continuous data need care.

The basis in your account

• Spot CFD and "rolling spot" positions are financed overnight; the swap you pay or receive reflects the same interest-rate differential that sets the futures basis. Check it with the swap calculator.
• A futures chart and a spot chart can show different highs and lows by the size of the basis. Mark levels on the instrument you trade.
• The basis shrinks towards zero as a contract approaches delivery (convergence).

Size conversions between lots, GC and MGC are on the contract converter.