It is safe to say that the number one goal as a trader is to prevent losses. Even if at the end of the day all we have is merely a $1.00 profit, as long as we didn't lose any money we are content - for the most part.
A market hedge is an almost certain way to offset or limit losses. Since Futures contracts tend to be expensive, and here we are demonstrating how to hedge in the futures market with Gold and Silver, we suggest to hedge with options. Options are much cheaper and many times just as leveraged.
Gold and Silver Covariance
Below is a snapshot of the Silver and Gold price trends. As you can see, they both follow the same volatility pattern and one is either higher or lower in price then the other. It doesn't matter whether you chose Gold or Silver to hedge inversely related futures since they highly correlated.
Gold (or Silver) and Corn
Here you can see the inverse relation by the peaks and troughs that are directly parallel to each other. This is the setup to look for when trying to find a hedging tool. If Corn were to fall in price but you owned a Gold contract, your losses in Corn would be offset by gains in Gold.
Gold (or Silver) and 30 Year Treasury Bond
Gold (or Silver) and Feeder Cattle
Gold (or Silver) and GBP
Gold (or Silver) and Sugar #11
Gold (or Silver) and Oats
There are many more Gold and Silver / Futures hedge setups that you can add to your portfolio. A great way to hedge trade is by using Options (ex: a Put option on Gold and a Call option on Corn). Keep in mind that diversity is also useful to limit losses. Another way to use Gold and Silver as hedge tools while diversifying your portfolio is to hold Gold or Silver underlying contracts while buying other Futures.