Gold Future

There are two markets on which the gold’s price is determined: the gold future market and the gold spot market. In spot market gold is delivered and traded immediately. Even if the name suggests this, gold is not physically exchanged in every transaction, but if you want to have access to this market then you must be able to deliver the gold on demand.

The gold future market trades future gold. Gold future is usually traded on the Commodities Exchange (COMEX) in New York, a part of the Chicago Mercantile Exchange Group (CME). These gold futures are used by both speculators and institutions. Futures contracts represent a standardized agreement between two parties where one party obligates to deliver a specific amount of gold and the other to receive it at a certain date in the future. Each COMEX gold future specifies that the gold must be 995 pure and the gold weight traded through each gold future is 100 troy ounces

This type of contract allows you to benefit from the rises and falls in gold’s price. A producer can sell gold futures at a high price and after a while when the price begins to fall they can buy their own gold futures back at a lower price. This way their gold will remain in a safe deposit but their profits will go up.

Usually these markets are quite predictive. Those who participate try to anticipate the moment when the price of gold will rise or fall and invest accordingly. The price is determined by the interest rate and the price expectation when the future gold contract will end.

Mostly gold future will be closed a few days or months before they will actually expire and thus the gold won’t be physically delivered. Even if the gold futures expire, most traders prefer to exchange it through electronic transfer than to physically move it from one safe location to another.