How To Invest In Gold Now – Buying And Selling Gold, Coins, Bars, Shares, Mining, ETFs

You want to make a gold investment, either in gold futures or options, but you can’t decide? It is a good idea to define each concept first. What exactly are gold options? They are based on gold futures and represent contracts. If you own a gold option, you have the right (but will not be forced to) to take a long or short investment position in the respective gold futures at the relevant strike price. When the option expires, you no longer have this right. Options are traded on exchanges such as the Tokyo Commodity Exchange (TOCOM) and the New York Mercantile Exchange (NYMEX). Futures are traded in series of one hundred gold ounces on NYMEX while the prices of options are quoted in dollars and cents. On the Tokyo Commodity Exchange, options are quoted in yens and traded in 1000 grams. The two kinds of options are put and call. Call options are favored by investors who think the price of gold will rise. With put options, it is the opposite – they are usually bought by investors who believe gold prices will fall.

Trade on options exchanges is not just about put and call buying. Selling and spreads is another commonly used strategy. The latter is carried out by buying and selling options at the same time.

Seemingly, there is not much of a difference between options. What is the difference, if any? Trading gold futures serves to reduce the risk of trading gold that gold owners and producers face given the unstable prices. Gold producers can ensure that their gold is sold at a certain price by using what is known as a short hedge. A short hedge is, for example, when a mining company signs an agreement to sell a certain amount of gold that will be delivered at a certain time. The price will match the price of gold on the date of delivery, which is in 4 months’ time. The company locks in the price by selling short a specific number of futures contracts on the respective exchange. If each contract covers 50 oz of gold, the company will have to short 50 futures contracts.

This method is referred to as placing a hedge around the gold, making sure that the gold will be sold as agreed. Gold options offer advantages such as extra leverage and the possibility to limit losses.

There are some factors, which determine the trading price of gold futures. These include changes in supply, including whether production quantities have been met or exceeded. The technology used to extract material is also important as it determines whether the mining company will have access to and extract metal. Another factor is changes in demand and whether some states are planning to increase their gold stock reserves. Recently, China and Russia have done so. Given that a number of factors influence the price of gold futures, the advice of an investment advisor may be of help. Gold futures are a risky investment instrument although profits may be high.

What are gold accounts and how to invest in gold? You will find all the answers in this gold exchange traded funds.