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Unlock the Powerful Edge of Trading Gold Futures

By Chin Yi Xuan, General Manager, Algopedia

With heightened uncertainty around the globe, gold is highly regarded as a way for investors to diversify their portfolios. When it comes to gold trading, FGLD is an excellent choice for investors who are seeking short-term speculative activities or longer-term portfolio hedging for gold.

As a derivative of gold, FGLD provides investors with exposure to gold, with an extra layer of convenience where investors do not need to manage the logistics of the gold they invest in, such as delivery and storage.

Key Reasons to Trade Gold Futures (FGLD)

As a regulated product by the Securities Commission Malaysia, FGLD is designed to be secure and transparent so investors can trade FGLD with confidence. FGLD offers several complementary benefits over buying physical gold.

  1. Leveraged trading

    FGLD provides leveraged trading, so that investors can gain leveraged exposure to the notional value of a gold futures contract with a relatively small amount of capital. At current notional value (as of late February 2023), this translates to investors getting access to approximately 36x leverage while trading FGLD. Essentially, this amplifies the impact of price changes, which provides a powerful edge, should leverage is utilised with clear intent.

  2. Forward price discovery

    FGLD also allows for forward price discovery in the gold market as longer-term investors can trade up to 12 months ahead of the current spot month.

  3. Flexibility

    Investors with directional conviction on gold should consider FGLD as an alternative to physical gold as FGLD offers investors the flexibility to express their conviction and profit from both bullish and bearish market outlook in the gold market.

    According to the World Gold Council, the net long positions of gold has been in a significant decline since 2020, from 871.92 tonnes to 527.03 tonnes by the end of 2022. This 65% drop in net long positions may suggest an inclination towards a bearish outlook in gold due to the continuous rate hikes by the Federal Reserve. As FGLD allows investors to initiate short trades in the gold market, it can be used to express speculative bearish outlook.

    Contrary to the belief that gold is an excellent inflation-hedge asset, gold provides exceptional directional trading opportunities on either side of the market, despite being in a high-inflation environment.

    By filtering for a 50-year time horizon (1972–2022) where US inflation exceeded 4% (1973–1982, 1985, 1988–1991, 2008, 2021–22), the non-inflation adjusted return of gold displayed a fascinating narrative. Rather than hedging against inflation, gold produced performances on both extremes of the spectrum in a high inflationary environment, providing investors with ample directional speculative opportunities.

Gold performance filtered for years where inflation >4%

Source: stern.nyu.edu

  1. Portfolio diversification

    That being said, a lack of historical linear relationship with inflation does not preclude FGLD from being used as an effective portfolio diversifier. Over a 30-year period, gold exhibited low correlation to major equity and fixed income indices. A low correlation between gold and other asset classes can help lower volatility in a multi-asset portfolio and enhance its risk-adjusted returns.

Gold Exhibited a Low 30-Year Correlation to Major Equity Indices

Gold Exhibited a Low 30-Year Correlation to Major Fixed Income Indices

  1. Hedging

    FGLD can also be utilised as a hedging instrument. For instance, gold futures contracts can be used strategically to hedge against the volatility and uncertainty in the gold market, especially in periods when the gold price fluctuates significantly.

    Considering the heightened volatility of the precious metal in 2022, a practical use case of gold futures is for physical gold owners to use FGLD to hedge against the risk of unfavourable price movements in the physical market.

    A way to measure the volatility of an asset is through the Average True Range (ATR) indicator, where a higher value of ATR implies higher volatility compared to a lower value of ATR. In 2021, gold’s ATR has stayed mainly below 25 since April, maintaining a range bound market movement throughout the year.

    However, the Fed’s seven rate hikes in 2022 to bring inflation under control has led to heightened uncertainty, which inevitably boosted the volatility in the gold market. This resulted in higher volatility in gold – its ATR stayed above 25 for most of the year.

    Essentially, the volatility of gold has relatively grown in 2022 compared to the prior year, so hedging with gold futures can play a pivotal role in keeping gold investors’ portfolio value intact.

Source: Gold Futures chart from TradingView

Unlock the Full Suite of Possibilities with FGLD

FGLD provides solid use cases and benefits from short-term speculation, to long-term hedging activities. As such, FGLD offers massive versatility to investors to participate in the gold market, regardless of time horizon at a reasonable capital requirement.

That said, as with any investment, it is crucial to be aware of the risks associated with gold futures and to ensure that any trades you make are well-researched and based on a sound trading strategy.

CHIN YI XUAN is the general manager of Algopedia, a professional proprietary trading firm in Malaysia. In addition to actively trading the futures market, he is also involved in developing proprietary automated and hybrid strategies to maximise edge in the market. Yi Xuan also drives the marketing strategy of the firm via content creation and idea sharing on all things trading and markets.

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Singapore Bullion Market Association Secretariat-Lee-Jia-Yi

Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

SECRETARIAT SBMA-Emily-Oh

Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

SECRETARIAT SBMA Clara-Chang

Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

SBMA Committee-Photo-john-levin

Mr John Levin

Global Metals
TD Securities
John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

SBMA Secretariat-Fabian-Lew

Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

SBMA-margare-secretariat

Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

One of Margaret’s key responsibilities is coordinating with the Event Management Company for SBMA’s prestigious annual event, the Asia Pacific Precious Metals Conference. This flagship conference plays a crucial role in the industry, making her involvement pivotal in its success.

Described as resourceful and self-motivated, Margaret Wong brings a wealth of skills and experience to her role at SBMA, ensuring efficient operations and effective engagement within the precious metals community in Singapore and beyond.

SBMA-Albert-secretariat

Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

Ms Pawan Nawawattanasub

Ms Pawan Nawawattanasub

CEO
YLG Bullion Singapore Pte Ltd

Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

SBMA-Shaokai-Fan

Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
World Gold Council
Shaokai Fan is the Global Head of Central Banks at the World Gold Council, responsible for advising governments on gold matters, and enhancing the gold market through engagement, dialogue, and thought leadership. He works directly with central banks and sovereign wealth funds on investment considerations. Prior to this position, Shaokai held multiple roles at Standard Chartered Bank, including Director for Asia Strategic Initiatives and Associate-Director for Public Sector coverage. Shaokai holds a Masters of Public Administration from Columbia University and the London School of Economics, and an undergraduate degree in finance and economics from New York University.

SBMA-Committee-Alan-Liew

Mr Alan Liew

Head of Bullion & Commodities Trading
United Overseas Bank Limited
Alan is Head of Bullion and Commodities Trading for Group Trading in Global Markets, United Overseas Bank (UOB). Alan joined UOB and started the bank’s commodities trading business in 2014, previously he spent eight years in Standard Chartered Bank (SCB) trading both precious and base metals. During his tenure at SCB, he obtained the SGE gold trader licence and was part of the pioneering team for the SGE business and the FX quantitative trading team. Prior to trading, he worked for Monetary Authority of Singapore in the Financial Risk Management Division. He holds a BSc (Hon) in Computer Science at National University of Singapore and a MSc in Financial Engineering at Nanyang Technological University.

SBMA-Committee-Nikos

Mr Nikos Kavalis

Managing Director
Metals Focus Singapore Pte Ltd
Nikos Kavalis is a founding partner of Metals Focus. He has over 20 years of experience in precious metals, having previously worked for the Royal Bank of Scotland and GFMS. Since September 2019, Nikos has been based in Singapore, where he also runs the local subsidiary of Metals Focus.

SBMA-Committee-khun nuttapong

Mr Nuttapong Hirunyasiri

CEO
MTS Gold Global Trading Pte Ltd
Nuttapong Hirunyasiri is the CEO of MTS Gold Group, one of Thailand’s top 10 companies and top 3 bullion companies. He started MTS Gold Group’s first overseas office in Singapore and has been expanding the group business internationally. He focuses on product development and innovation for gold investment, with the aim of being a leader in providing the full suite of gold investment services in the ASEAN region.

SBMA Committee-Photo-Raman-Walia

Mr Raman Walia

Executive Director, Head of Commodities Sales – APAC
JP Morgan Chase Bank N.A.

Raman is Executive Director and Head of Commodities Sales, APAC, for J.P. Morgan. He joined JPMorgan in 2008 in New York, moved to Singapore in 2011, and helped expand the precious metals business in the region. Raman has an MBA from Cornell University, and likes to travel in his spare time.

SBMA Committee-Photo-Andrew-Clarke

Mr Andrew Clarke

Head of Brink’s Global Services
Brink’s Global Services Pte Ltd

Andrew Clarke is the Head of BGS (Brink’s Global Services) for Singapore, Indonesia, Malaysia and Brunei. He has held various leadership positions throughout his career in secure logistics and risk management with Brink’s, which started in Hong Kong in 2010. Andrew relocated to Singapore in 2018 to expand the precious metals line of business along with Brink’s portfolio of services and industries.

SBMA Committee-Photo-Kazuya-Naoki

Mr Kazuya Naoki

Head of Metals, Asia
ICBC Standard Bank Plc, Singapore Branch

Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

SBMA Committee-Photo-Vinh-Nguyen

Mr Vinh Nguyen

Head of Precious Metals, Asia
StoneX APAC Pte Ltd

Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

SBMA Committee-KL-Yap

Mr KL Yap

General Manager, Singapore Refining Business Unit
Metalor Technologies (Singapore) Pte Ltd
KL YAP is the General Manager of Metalor Technologies (Singapore) Pte Ltd’s Singapore Refining Business Unit. He joined Metalor in 2013, initially in Refining Sales. In 2014, he became Refining Business Unit Manager, leading the development of a new precious metal refinery. KL was Vice Chairman of SBMA from 2017 to 2021, now serving as Chairman. With a degree in business commerce, finance, and marketing, he brings prior experience from refinery and heavy industries.