The Commodity Exchange Inc. (Comex) is an American commodity exchange where buyers and sellers electronically meet to invest in precious metals.

COMEX launched gold futures trading in December 1974 and gold options trading in 1982 (options are on gold futures, not on the bullion itself). Today, COMEX is the largest gold futures exchange in the world. In 1994, Comex merged with the New York Mercantile Exchange (Nymex), officially becoming its division responsible for metals trading. Since 2008, Nymex and Comex have been owned and operated by the CME Group, the largest derivatives marketplace in the world. Trading is conducted on the electronic Globex platform, from 6:00 P.M. to 5:00 P.M. from Sunday through Friday.

Comex and Gold Price

The spot gold price is derived from the Comex futures price for the nearest contract. The chart below presents historical closing spot prices.

Chart 1: Comex gold closing (spot) prices from January 1975 to February 2016.

COMEX gold price

Although gold futures are physically delivered upon expiration, most contract positions are closed prior to the delivery period to avoid the costs of storage, insurance, or transport of bullion. Comex also enables investors to leverage their positions using futures. Leverage, high liquidity, the possibility of covering positions (liquidating them instead of physical delivery), low transaction costs and minimized counterparty risk (due to compulsory margins, marking-to-market mechanisms and clearing operations of the futures exchange) are factors which draw investors to Comex. This is why Comex is used by speculators to speculate on the future direction of prices, but also by hedgers to hedge themselves against adverse price changes. It is a centralized exchange where all orders are executed through one system. The centralization and higher transparency of the Comex contribute to its disproportionately large role in gold price discovery.

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