Trading Non-Physical Gold

Learn to Trade

Achieve Success
Enriching Lives, Realizing Dreams
Jalatama Management

Todays Agenda

The Origins of the Futures Markets

Modern Day Futures Markets

Why Gold?

The Benefits of Non-Physical Gold

Return & Risk Management

Futures Industry Structure & How Jalatama Fits In

Why Jalatama Management?

The Origins of the Futures Markets

History
Futures derived from a farmers need to secure a price for
their crops that would cover their harvesting costs.

This bargain suited both parties - the farmer guaranteed a

price for harvesting his crops and the buyer knew his costs
in advance.

Such contracts became common. If neither party wanted to

follow through with the deal they could pass on the obligation
to another farmer or buyer.
The prices of crops would go up and down depending on the
weather. It was quickly realised it was possible to make
money trading these commodities without any intention of
delivering and/or receiving the goods

Modern Day Futures Markets

Different Uses of Futures Markets

Futures have evolved into an efficient platform for a variety of uses
Different types of market participants
Hedgers Manage risk. Oil producers, mining companies etc

Speculators Short term positions to profit from two way price

movements
Investors Longer term positions expecting price gains
Arbitrageurs Profit from price discrepancies between daily
spot and futures markets

Futures Vs Spot Price

Spot price is the price paid for gold at the present time
Futures price is the price paid at a specified date in the
future and incorporates the sellers cost of carry (storage and

insurance).
In normal market conditions, the cash price will be lower
than the futures price due to the expenses related to carrying
the commodity until delivery

Futures Contract Pricing

Capital Gain

Sell Hedge:
Selling Price
Certainty
Supply

Futures Basic:
Spot + Carry Cost
= FUTURES PRICE

Speculators
Risk Taker

Futures Price
Futures Price
Equilibrium
Demand
Buy Hedge:
Buying Price
Certainty

Business
Decision

Price Reference

Speculators
Risk Taker
Investor:
Buying for
diversification
& capital gains

Hedge Position

Capital Gain

Why Gold?

History of Gold
For thousands of years, gold has been valued
as a global currency, a commodity, an
investment and simply an object of beauty
Gold has attracted investors throughout the
centuries, protecting their wealth and
providing a 'safe haven' in troubled or
uncertain times
It offers investors insurance against extreme
movements in the value of other asset classes

Why Investors Buy Gold

Limited Supply
Intrinsic Value
A Currency
A Commodity
Safe Haven
More stable
Inflation Hedge
Of all the precious metals, gold is the most
popular as an investment

Growth, Recession & Uncertainty

As gold is a widely used industrial commodity
it benefits during economic booms
Gold also benefits during downturns due to
falling real rates and currency debasements
Gold is invariably the destination for flight to
safety scenarios during global tensions

Long Term Outlook

Low real rates in major Western economies
Currency wars
Growing demand from India and China
Long term gold is well positioned to make substantial future
gains

Short Term Outlook

Adjustment to monetary policy
Changes in sentiment to risk taking
Technical analysis
Short term golds price will fluctuate providing opportunities to
maximise profit

Maximise Profit
Risk
Tolerance
USD
Monetary
Policy

Short Term Factors

Technical
Analysis

Fluctuating
Demand
Euro Issues

The Benefits of Non-Physical

Gold Investment

How To Invest
Physical
Jewellery
Bullion
Coins
Non-Physical
Spot Gold
Futures
ETFs

Disadvantages of Physical
Higher investment required

Jewellery designs increase price

Jewellery shops add 15-20% premium

Goldsmiths can be dishonest regarding purity

Storage and insurance costs are higher

Time consuming to buy and sell

Advantages of Non-Physical

Low capital requirements margin trading

Much higher % capital gains
Efficiency
Two-way market

How to trade?
Two concepts you need to understand:
Margin trading
Two way trading

Margin trading
Margin trading is a facility provided to you in
order to conduct a transaction where the
contract / trading value exceeds the paid-in
capital.
Margin in gold trading serves as collateral that
you pay to the futures brokerage company as a
security deposit. This indicates the investor is
able to meet any payment obligation.
E.g. If you want to trade the worth of
300k, you only require the margin 1k,
depend of the leverage set

Two way trading

Basic principle of the two-way opportunity is
opening a position that reflects market
propensity
One buys (buy new) when they believe the
price will increase (bullish) and closes by
selling (sell close) when the price is higher
One sells (sell new) when they believe the
price will decline (bearish) and closes by
buying (buy close) when the price is lower

Sell Close,
1518

Sell New,
1515

PROFIT
PROFIT

Buy New,
1500

Buy Close,
1490

Comparison between Gold trading and

other kinds of investment

Comparison

Fixed deposit

Property

Stock

Gold Trading

Investment/capital
value

Same as savings/time
deposit value

Same as projects
capital

Same as stock price

Can be 1% of contract
value

Bank and companies'

businesses

Project or factory
owners credit

Public
company/public
companys
management

Owner of the funds

(investor)

Simple

Complex

Simple

Simple

Short term and long

term (5 years, 10
years, etc.)

It depends on
investing publics
interest, supported by
the credibility of
companies

Profit and capital can

be withdrawn anytime

After a few years or

after the break even
point is reached

When stock price

increases

It can be gained both

when price is up and
down in reference to
the initial opening
position with
unlimited profit

You only buy

You only buy when

price low and sell
when price high

Two way you can

buy and you can sell

Funds user

Procedures and
requirements

Period to return
capital and profit

Profit potential

How to do?

Time-limited

It depends on the
banks interest rate

You only save

Return & Risk Management

Calculating P&L
Current Price = $1400 per troy ounce
1 troy ounce = $1400
100 troy ounces = 1 Gold Futures contract
1 USD movement = $100 change in value per contract
Example
Investor buys 6 contracts at $1400
Investor sells (liquidates) 6 contracts 2 days later at $1415
$15 x $100 x 6 contracts = $9,000 Profit

Return on Capital
Non-Physical Return on Investment
Actual Value of 6 contracts at $1400
600 x $1400 = $840,000
1 contract = $500 margin/deposit
6 contracts = $3000
Sell Price $1415 = $9000 PROFIT
ROI = 200%

Physical Market Return on Capital

Actual value of 600 troy ounces
600 x $1400 = $840,000
Zero leverage/Full Amount Paid = $840,000
Sell Price $1415 = $9,000 PROFIT
ROI = 1.07%

Almost 150%. This return can increase

further via two-way trading futures
markets

Risk Management
Number one focus is limiting losses
Automatic stop losses
Technical analysis for appropriate exit strategies
Risk/Reward Ratio 1:2
24 hour on-call account manager

Short Vs Long Opportunities

Short trades can produce great returns in short amount of time
Fear and panic leads to sharp downtrends
These downtrends can be easily identified before they happen

Long trades can lead to substantial returns but over a longer

period of time
Upward trends occur as investors gradually add more to their
long positions causing a steady rise
Price moves in a steady manner as more market participants
become aware of the uptrend

Real Example of a Successful Short Trade

7th to 10th May

6th May sell signal

$1470
7th May client sells

$1459

Profit target

$1420

$9000 margin for 18 lots

$109,500 profit

1117% Return on Investment

10th May client

liquidates

Real Example of a Successful Short Trade

15th to 20th May

15th May sell

signal

Support area
$1423 to $1420

Price breaks
through
support on
7th attempt

$1420

1st Profit target $25

Minimum trade of 3 lots

1st Profit target = $7,500
2nd Profit target = $21,000
2nd Profit target $70