Everything you need to know about gold futures
What are gold futures
Gold futures contracts are exchange-traded contracts to buy or sell gold at a fixed price on a future date. Gold futures contracts are used both for hedging against future price fluctuations and for speculating on the price of gold in the future. Hence all the time you have spent on learning how to read gold price today coochbehar or Agra and the skills you have built on gold trading will still be useful when you are dealing with gold futures.
What is its importance?
Gold futures contracts exist because gold is difficult to store and transport. To prevent the need to store large quantities of physical gold, market participants can trade in a contract that allows them to purchase gold at a certain price in the future, without having to deliver any physical gold until then.
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How is its value determined?
The value of a futures contract depends on the spot price at which it is traded, as well as its expiration date, when it becomes due for delivery, and its interest costs. The value of any commodity futures contract depends on the spot price at which it is traded, as well as its expiration date, when it becomes due for delivery, and its interest costs. You can confirm this by looking up gold price today Imphal or for any other place and then matching the prices with gold future prices. See more.
However, before you buy gold futures you should know the following about them:
- You can buy one of these contracts if you think (or hope) that the price of gold will go up by a certain amount during the contract’s life. In other words, you can sell something to someone else for more than you pay for it. The seller of an option is called the “writer,” and the person who has to buy it is called the “buyer.”
- If you have a gold future contract, you own gold at expiration. You don’t have to own any gold to participate in the market, but if you don’t own some physical metal, there is no way for you to cash out your position. If everyone holds on to their positions until expiration, then everyone’s holdings will be exactly what they were when they wrote their contract. If a few people cash out early, there may be some selling pressure on the spot market, but overall there will be no net change in physical supply or demand.
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The advantages of futures contracts are:
- Allows you to reap the benefits of call options
- Remarkable liquidity
- Contracts can be used to lock in a price for future sales or purchases
- Hedge against price fluctuations
- Easier to obtain financing than with forwarding contracts
- Less costly to establish than forwarding contracts
- Offer the opportunity to make money from rising (or falling) prices without actually having to purchase the underlying asset
So you want to trade futures. Great! Futures can be a great way to access the markets, but please make sure you fully understand the risks involved.
- Futures can increase leverage and losses can exceed your account balance.
- Futures require execution and settlement, which may not be as simple as placing a market order and exiting when you are in profit or loss.
- Futures can be complicated so please make sure you fully understand all of the risks involved before trading them.
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