An Introduction To Gold Futures Trading

Trading gold futures does not require gold to exchange hands. A gold future describes a commitment by the buyer to buy a certain quantity of gold at a pre-set price in a future time. Gold futures are the most beneficial way to achieve leveraged exposure however can be volatile. 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 operators often takes facts outside of context and also disseminates half-truths designed to sway sentiment.

Gold's significance in world markets makes COMEX Division gold futures and options an important risk management tool for commercial operators. Investors watch Comex data as an indicator of fizz in the market. Trading gold futures securities happens mostly on paper: a large portion of the gold bought or sold in the futures market never exchanges hands. Gold futures are typically traded by "speculators," operators who buy or sell gold futures but are not interested in the actual physical gold, versus "hedgers," who do value the gold by itself as an investment. Trading gold futures also has low commissions.

Gold options are powerful and cost-effective investing instruments, which can be used to own desired amount of gold in future, and can also be used to hedge price movements of gold that you have. Every futures contract is for 100 troy ounces.

Prices in an organized derivatives market replicate the perception of market participants about the future and lead the prices of underlying to the alleged future level. The prices of derivatives converge with prices of the underlying at the conclusion of the derivative contract. Prices swing 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-known as the "spot price"-is the price quoted for the spot gold, which includes delivery, to be paid two days following the date of the actual transaction.

To summarize, let me stress once more that gold futures are not a risk free financial commodity and must be considered judiciously. Investments should only be made with risk assets which is money you can afford to lose and it would not cause you to change your lifestyle in any way.

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