Gold Futures

Futures and options

For short-term speculative bets, you can try investing in precious metals by buying for example gold futures or options contracts.

These types of investments can give you a chance to control a large position in gold for a relatively small investment. On the other hand, the chance of losing your entire investment is high, making them a risky investment option.

Futures

A futures contract is a financial agreement to buy or sell a specified amount of commodity at an agreed date and at a price set at the time the contract is established.

Precious metals futures are traded in futures exchanges worldwide.

People investing in futures are most commonly speculators taking risks on the rise and fall of the price of gold. They buy gold futures when they anticipate the rise of the gold spot price and they sell when it is expected to fall.

This investment method doesn't require owning or taking delivery of physical hold. They just receive or pay the difference in cash on delivery date.

The profit potential can be very high, as well as the risk of losing your investment associated with such profit possibilities. For example, the investor can control 100.000$ worth of gold by paying only 5.000$.

New investors seeking to enter the precious metals market are recommended to stick to less risky means like buying precious metal ETFs or physical bullion coins and bars.

If you would like to buy or sell futures contract, you need must open a trading account with a company that handles futures trades.

Options

An option contract is like a futures contract a financial agreement to buy or sell a specified amount of commodity at an agreed date and a fixed price set at the time the contract is established.

Gold options provide the ability to gain big profits just like gold futures.

Unlike futures contract, the right to buy or sell can be exercised anytime before the option expires;

The option holder can choose not to buy or sell if the precious metals price moves against him during the option's lifetime.

Another aspect of gold options is that unlike gold coins or etfs that only gain value when the gold price goes up, you can make profit when the gold price goes down by buying gold put options which allow you to bet against the precious metal spot price.

This can also be very useful if you own physical metals and you want to protect your investment when the spot price goes down by buying some put options.

For their big leverage potential, but with big leverage possibility comes an increased risk of losing your investment. They have many hidden costs and extreme market volatility.

I would say that gold futures and options are not for the average investor in general.

You can find more information here about Gold Futures

0