Gold and Silver

Have you been watching gold and silver? Both of these precious metals have captured the attention of many investors, including those who have never before traded commodities. Whether you believe that gold and silver prices will continue to rise, or will decline to more historically typical levels, commodity futures and options provide a way to speculate in these markets.

Unfortunately, the increased volatility accompanying the higher price levels of gold and silver has made buying and selling a traditional futures contract too expensive for many investors. For example, to buy or sell one COMEX® gold contract requires $5,399 in margin while a COMEX silver contract requires $8,100 in margin. (Source: NYMEX, a division of CME Group. Values are as of July 3, 2009. Values may change.) Higher implied volatilies have, in turn, inflated option premiums as well, making considerable the cost of a simple put or call option purchase. How then can the beginner who wishes to limit risk or the average investor with only modest risk capital participate in the precious metal markets?