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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 specific amount of gold at a pre-determined price in a future time. Gold futures are the very best way to achieve leveraged exposure however are volatile. Gold futures are a fascinating and important territory, but they do not deserve the level of mysticism and dread they seem to cause. The futures priesthood that 'informs' gold-stock traders often takes events outside of context and also disseminates half truths designed to sway sentiment.

Gold's significance in global markets makes COMEX Division gold futures and options an essential risk management tool for commercial traders. Investors watch Comex contracts as an indicator of fizz in the market. Trading gold futures securities happens mostly on paper: most of the gold bought or sold in the futures market never exchanges hands. Gold futures are generally negotiated by "speculators," investors who buy or sell gold futures but aren't 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 can be powerful and cost-effective investing tools, that can be used to own desired quantity of gold in future, and can also be used to hedge price changes of gold that you have. Every futures contract is for 100 troy ounces.

Prices in an organized derivatives market mirror the beliefs of market participants regarding the future and lead the prices of underlying to the perceived future level. The prices of derivatives converge with prices of the underlying at the expiration 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-called the "spot price"-is the price quoted for the spot gold, which includes delivery, to be paid two days after the date of the actual deal.

In closing, let me stress again that gold futures are not a risk free financial commodity and must be considered judiciously. Investments should only be made with risk capital which is money you can afford to lose and it would not cause you to change your standard of living in any manner.

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