Roll in gold trading
A roll closes a gold futures position in the expiring month and reopens it in a later month to keep exposure without delivery; the cost is the month spread.
Also called Rollover (futures), Contract roll, Roll yield
A roll moves a futures position from one contract month to the next. A trader long February GC who wants to stay long past February’s first notice day sells February and buys April in one spread transaction. The cost or gain of the roll is the price difference between the two months: in contango, the trader pays up to buy the later month; in backwardation, the later month is cheaper. Over many rolls this “roll yield” is a significant part of a long-term futures return.
How it applies to gold trading
Gold’s active months are the even months, so a continuous futures position is rolled about six times a year. Volume migrates from the expiring month to the next over a week or two before first notice, and prices on charts of the “front month” jump at the roll by the size of the spread, which is why continuous futures charts are back-adjusted. ETFs that hold futures rather than bullion pay the roll continuously, which is part of why they lag spot in contango.
Spot XAUUSD traders do not roll contracts; their equivalent is the nightly swap, which charges the same financing in small daily pieces.
A common mistake
Reading the price jump on an unadjusted futures chart at the roll as a market move. It is the contango between months, not a change in the gold price.
See also: GC futures, Contango, Swap and rollover, Open interest.
Frequently asked questions
When should I roll a gold futures position?
Before the first notice day of the expiring month, typically when volume and open interest have moved to the next active month, about one to two weeks before expiry.
What is roll yield?
The gain or loss from rolling between months. In contango the trader buys the later month at a higher price, a cost; in backwardation the later month is cheaper, a gain.