(Mike Maharrey, Money Metals News Service) Kalshi is getting into the gold business.
Kind of.
The catch is it doesn’t involve any actual gold.
The prediction market exchange recently announced the launch of a gold perpetual futures contract, colloquially referred to as a “perp contract.”
Unlike traditional futures contracts, perps never expire and don’t require anybody to hold the underlying asset.
The Kalshi calls its gold contract GOLDPERP. According to the company’s Commodity Futures Trading Commission (CFTC) filing, one contract provides price exposure to the equivalent of one troy ounce of gold. Kalshi allows trading in increments as small as 0.001 contract, effectively giving exposure to the price of 0.001 ounce of gold.
It breaks down like this:
1 contract = 1 oz of exposure
0.1 contract = 0.1 oz
0.01 contract = 0.01 oz
0.001 contract = 0.001 oz
In effect, if gold is $4,000 per ounce, a 0.001-contract position represents $4 of gold exposure.
Contract prices move in minimum increments of 10 cents per ounce. Investors can trade fractions of a contract as small as 0.001, providing exposure equivalent to one-thousandth of an ounce of gold.
This is the most important part. The contract is entirely cash-settled, and there is no mechanism to deliver or receive physical gold as there is in a traditional futures contract.
Kalshi isn’t required to hold any gold either. It determines funding Monday through Friday at 10 a.m., using a complex formula involving the spot price of gold
If GOLDPERP has averaged below spot, the rate is negative, and shorts pay longs and vice versa.
For instance, if gold is trading at $4,000 and the funding rate at 10 a.m. came in at +0.01%, you would owe roughly 40 cents for one full contract. ($4,000 × 0.0001)
The short on the other side of the contract would receive the money.
Kalshi earns money on both sides of the transaction, charging a fee whenever you open or close a position.
Traditional futures exchanges are not pleased with the move, worried it could disrupt their model. The CME Group filed a lawsuit against the CFTC to block approval of Kalshi’s perp contracts, arguing they qualify as swaps, not futures.
A Kalshi spokesperson said the company introduced the gold futures contract due to the growing interest in commodities, and he seems to understand the appeal in this day and age.
“Metals, especially gold and silver, have a story to tell because of inflation.”
But have I mentioned that there is no metal involved in any step of this transaction? Not one ounce!
It is purely a cash contract with the price of gold as a reference.
The Kalshi contract creates an avenue for synthetic exposure to the gold price without purchasing gold at all. Leverage magnifies this effect. For example, an investor can obtain, $15,000 of gold exposure while posting only a fraction of that amount as collateral.
This could potentially disrupt the market because GOLDPERP creates another avenue for speculative gold exposure without the need for corresponding physical bullion demand. This could channel more money into the paper market and away from physical bullion. As a GATA email put it, it could “divert more gold investment money from metal to the imaginary.”
However, some analysts believe sophisticated investors on the short side of a perp contract may hedge their exposure by buying COMEX futures, ETFs, or physical gold.
If you want to gamble on the gold price, a Kalshi perp contract may be a good go-to, but don’t imagine you are investing in gold. You own nothing more than a bet.
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
