Path B · Futures GC/MGC · Module B1
In spot gold, your broker is your counterparty. Path B opens by turning that fact inside out. Same metal, same price on the screen — but the plumbing behind it runs the other way, and it changes who stands on the far side of your trade.
What this module does
The fact we're inverting
Here is spot's hard truth, worth stating plainly: when you trade spot XAU/USD, there is no exchange between you and your trade — your broker is the market. You click a price your broker derived, on a contract for difference your broker wrote, and your broker books the other side. The conflict that creates is real and structural. The honest response isn't to fear it; it's to understand it and choose a broker constrained enough to be trusted with it.
Now hold that picture still and turn it over.
Futures are not a second version of the same thing, and they're not a parallel road that happens to also involve gold. They are the structural inverse of spot — the same exposure to the same metal, reached through plumbing that runs in the opposite direction. Where spot collapses the whole market into one firm, futures pull it apart into named, separated roles: the firm that carries your order, the venue that matches it, and the entity that ends up on the other side of it. Those are three different parties in futures. In spot, they were one.
That's the thesis of Path B, and everything in it is a consequence of this one move. So we start here, with the single change that makes futures what they are — and then spend the rest of the path watching it ripple outward into costs, margin, and how you choose who to trade through.
The two contracts
Spot gold had a ticker and a quote. Futures have something more specific: a contract — a standardised, exchange-defined agreement to exchange a fixed quantity of gold at a future date. You don't trade "gold" on COMEX. You trade a contract whose every term is fixed in advance by the exchange, identical for everyone who holds it. The only thing left for the market to decide is the price.
Two of these contracts matter to you, and they're the same contract at two sizes.
GC
Gold Futures
The reference contract. The institutional benchmark — and the one the metal is actually delivered against.
Start here
MGC
Micro Gold Futures
What retail actually trades. One-tenth the dollar exposure per tick, same price action, same market.
Lead with MGC, because that's the one you'll open. It is exactly one-tenth of GC in every dimension: a tenth the ounces, a tenth the tick value, a tenth the margin, a tenth the dollar swing when gold moves a dollar. Nothing about it is a different market — it tracks the same gold price tick for tick, because it's defined as a tenth of the same contract. It exists so that a retail account can take a position sized to a retail account.
GC is the one to understand even though you may never trade it, because GC is the reference. It's the contract institutions trade, the contract the metal is delivered against, and the contract MGC is a fraction of. When we talk about how futures pricing works, why it can't drift from the physical market, or how delivery keeps the whole thing honest, we're talking about GC — and MGC inherits all of it by being a tenth of it.
One practical warning that follows directly from the 10× relationship: on most platforms GC and MGC sit side by side in the symbol list, and they look nearly identical. Click the wrong one and you've opened ten times the exposure you intended. Always confirm the symbol before you size. The mistake is common precisely because the contracts are deliberately identical in everything but scale.
The anchor
Here's the question worth asking of any instrument: what holds it honest? In spot, the answer was a chain of arbitrage and a constrained broker. For futures, the answer is more concrete than anything in spot. It's a physical bar of gold sitting in a vault.
Every GC contract is a binding agreement that, at expiry, 100 troy ounces of gold — refined to a minimum fineness of .995 and cast to exact COMEX specification — can actually change hands. Not a cash-settled bet on where the price went. An enforceable claim on metal, deliverable into a COMEX-approved depository against a warrant. The contract is, at its root, a promise about a bar.
That single fact is what keeps the futures price tethered to the real gold market. If the contract price drifted away from the physical spot price, someone could buy the cheaper of the two, sell the dearer, and take or make delivery to collect the difference risk-free. That possibility — the standing threat of delivery — is the rope that ties the paper to the metal. The contract can't wander, because at the end of its life it has to be able to become gold.
The number you already know
This whole site opens on the London Good Delivery standard — the LBMA's minimum acceptable purity for a wholesale gold bar: 995 parts per thousand fine. The number this site is named for. It turns out the COMEX delivery spec demands exactly the same floor: a deliverable GC bar must assay no less than .995 fineness. The spot market and the futures market, approached from opposite ends, anchor to the very same bar. You didn't know that loop was open. It is now closed.
And here is the part that matters for you specifically, because it's where the "physical" stops being abstract. You will almost certainly never take delivery — and the system is built assuming you won't. The cutoff has a name: First Notice Day, the first day on which a holder can be assigned actual delivery of metal. For GC, it falls on the last business day of the month before the delivery month — earlier than most people expect. Retail traders close or roll their positions well before it arrives, and most futures brokers will close a lingering position automatically rather than let a retail client wander into a delivery obligation they can't meet.
So the deliverability is real, but for you it's load-bearing rather than literal. You benefit from the honesty it enforces on the price without ever touching a bar. The threat of delivery does its work whether or not delivery ever happens to you — which is exactly why the date you most need to know is the one that tells you when to be gone.
The inversion, made visible
In spot, an order travels up a chain: from your screen, back through your broker, a liquidity provider, the banks, to the futures market where price is actually discovered. The order never leaves a private arrangement; the last link is the first link's mirror, and your broker sits at both ends.
A futures order travels a different road. It leaves your hands, passes through the firm that carries it, and arrives at a public venue where it meets a real, unrelated stranger's order. Then something happens that has no analogue in spot at all — and it's the hinge of the entire path. Follow it down.
You are here
Your order · Buy 1 MGC
The FCM
A Futures Commission Merchant — the firm you hold your account with. It carries your order to the exchange and guarantees your margin. Note what it is not: it is not the party you trade against. It's a conduit, not a counterparty.
CME Globex · the matching engine
A public, electronic venue. Your order arrives here alongside everyone else's — institutions, hedgers, speculators, market makers — with no broker standing between you and the queue.
The central order book
One shared book of live bids and offers, the same for every participant. Your buy is matched to a real seller's offer at a public price. For one instant, you have a direct counterparty: that stranger.
The hinge · Novation
CME Clearing steps in
At the moment of the match, the clearing house legally interposes itself between the two of you. It becomes the buyer to the seller and the seller to you. The stranger you matched with vanishes from your side of the trade entirely — you no longer face them, or anyone. You face the clearing house.
Where it lands
Your counterparty is the clearing house — an entity novated into every trade, backed by the pooled margin of the whole market. The FCM that carried your order cannot be the house, because the house is structurally somewhere else. That's the inversion. In spot, collapsing the chain put your broker on the other side of your trade. In futures, the chain stays separated, and a clearing house no one trades against on purpose ends up on the other side of everyone's.
Read it against the spot chain. There, the chain folded back on itself and your broker held both ends. Here, each role is a separate party, and novation installs a neutral counterparty at the centre. Same screen, same metal — opposite plumbing.
That one step — novation — is why the rest of Path B looks nothing like spot. No broker spread, because no broker is pricing against you. No swap, because no broker is financing your position. Exchange-set margin, exchange-driven liquidation, a public price you can verify against everyone else's screen. Every difference you'll meet in the modules ahead traces back to the hinge you just watched turn.
Carrying into Path B
The right question of any instrument is who's on the other side of your trade. In spot, the honest answer was uncomfortable: your broker. In futures, the answer is the strangest and most reassuring thing about the instrument — almost nobody, and an institution built so that the question stops mattering. The next module follows the order past the hinge and watches the exchange do, in the open, every job your broker used to do in private.