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Gold Futures Trading: A Short Report
Trading gold futures does not involve gold to exchange hands. A gold future describes an agreement by the buyer to buy a certain quantity of gold at a pre-determined price at a future time. Gold futures are the best way to obtain leveraged exposure however they are volatile. Gold futures are a fascinating and important realm, but they do not deserve the level of mysticism and fear they seem to create. The futures priesthood that 'informs' gold-stock investors typically takes events beyond context and also disseminates misleading information designed to sway sentiment.
Gold's importance in world markets makes COMEX Division gold futures and options an important risk management tool for commercial investors. Operators watch Comex contracts as an indicator of fizz in the market. Trading gold futures securities happens largely on paper: the majority of the gold bought or sold in the futures market never moves. Gold futures are usually traded by "speculators," traders who acquire or sell gold futures but aren't interested in the actual gold, versus "hedgers," who do value the gold by itself as an asset. Trading gold futures also has low commissions.
Gold options are also powerful and cost-effective investing instruments, which can be used to own desired quantity of gold in future, and may also be used to hedge price changes of gold that you possess. Every futures contract is equivalent to 100 troy ounces.
Prices in an organized derivatives market reflect the belief of market participants concerning the future and lead the prices of underlying to the supposed future level. The prices of derivatives join with prices of the underlying at the expiration of the derivative contract. Prices vary based on supply and demand (although the twice-daily gold fix in London aids set a reference point for prices). The price of gold in the spot gold market-identified as the "spot price"-is the price quoted for the spot gold, including delivery, to be paid two days following the date of the actual contract.
In conclusion, let me emphasize again that gold futures are not a risk free financial commodity and must be considered judiciously. Investments should only be made with risk resources which is money you could afford to lose and it would not cause you to change your lifestyle in any way.
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