Trading gold futures does not require gold to exchange hands. A gold future is the term for an agreement by the buyer to buy a specific quantity of gold at a pre-set price in a future time. Gold futures are the best way to gain leveraged exposure however are capricious. Gold futures are a fascinating and important realm, but they do not deserve the level of mysticism and dread they seem to generate. The futures priesthood that 'informs' gold-stock operators often takes events out of context and also disseminates half truths planned to sway sentiment.

Gold's importance in global markets makes COMEX Division gold futures and options an important risk management tool for commercial operators. Investors watch Comex contracts as an indicator of froth in the market. Trading gold futures securities happens largely on paper: most of the gold purchased or sold in the futures market never moves. Gold futures are generally traded by "speculators," operators who buy 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 also powerful and cost-effective investing tools, which can be used to own desired amount of gold in future, and can 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 reflect the beliefs 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 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, including delivery, to be paid two days after the date of the actual transaction.

To summarize, let me stress again that gold futures are not a risk free financial commodity and should be considered judiciously. Investments should only be made with risk capital which is funds you could afford to lose and it would not cause you to change your existence in any way.

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