Trading gold futures does not require gold to exchange hands. A gold future is the term for a commitment by the buyer to buy a certain quantity of gold at a pre-set price at a future time. Gold futures are the best way to gain leveraged exposure however can be capricious. Gold futures are a fascinating and important territory, but they do not deserve the level of mysticism and fear they seem to generate. The futures priesthood that 'informs' gold-stock investors typically takes events out of context and also disseminates half truths planned to sway sentiment.
Gold's significance 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 froth in the market. Trading gold futures securities happens mostly on paper: a large portion of the gold purchased or sold in the futures market never exchanges hands. Gold futures are usually traded by "speculators," traders who acquire or sell gold futures but aren't interested in the physical gold, versus "hedgers," who do value the gold by itself as an investment. Trading gold futures also has low fees.
Gold options are powerful and cost-effective investing instruments, which can be used to own desired amount of gold in future, and may also be used to hedge price changes of gold that you hold. Every futures contract is for 100 troy ounces.
Prices in a structured derivatives market replicate the belief of market participants about 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 fluctuate 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-called the "spot price"-is the price fixed for the spot gold, which includes delivery, to be paid two days following the date of the actual transaction.
In conclusion, let me emphasize again that gold futures are not a risk free financial commodity and should be considered cautiously. Investments should only be made with risk capital which is funds you can afford to lose and it would not cause you to change your lifestyle in any way.
Gold Futures Trading:The Basics
Investing in gold futures does not require gold to exchange hands. A gold future refers to an agreement by the buyer to buy a certain amount of gold at a pre-determined cost at a future time. Gold futures are the best way to gain leveraged exposure but are volatile.
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