What are gold futures?
The
Gold Futures market is one of a number of commodity futures in which contracts are concluded, agree to buy or sell gold at a certain price on the date in the future. Gold Futures are used as a way that producers and gold migrators to provide their products against drastic fluctuations on the market, and as a way to make speculators money from the same market movements. The Golden Futures market is very attractive to investors, partly because trading with margins allows relatively small gold market movements to be translated into large financial profits.
When investing in Futures on Gold Futures, you basically promise someone to buy them or sell a certain amount of gold in settlers the date in the future. For example, the investor is quite convinced that the price of gold will increase in the next three months. If he wanted to profit from this by mere purchase and sale of gold and had to invest 1 00$ 0 (USD), bought with gold $ 1,000 for $ 500 per ounce per total of two ounces. If it increased to $ 800 per ounce in three months, it would clean up a profit of $ 600; It is not a bad profit, but also not very impressive.
But buying gold futures on a margin can take advantage of money that must invest extremely. Depending on the state of the market and the size of its purchase, the amount of money it must lay on a margin ranges from 2% and 20% of the total amount it wants to buy. On the average market, its Gold Futures margin is likely to be around 5%, so the same $ 1,000 can be used to buy gold futures for $ 20,000 of gold or 40 ounces for $ 500 per ounce. If Price is increasing the same amount, to $ 800 per ounce, it will clean up a profit of $ 12,000, although it had only $ 1,000 for investment.
On the other hand, it is much easier to lose money quickly when trading with futures on gold on a margin than when they buy with cash in hand. If the same 40 ounces lose only 5% of their value, cageSNE for $ 475 per ounce, then the entire initial investment will be $ 1,000 away. The margins will have to be terminated regularly because the price is decreasing to the point where you are approaching the initial investment. If the investor is unable to overcome his margin, then the account is closed and the investor will lose all his money. The temptation of gold futures is huge, because of the huge amount of money to be obtained if they play right, but most people who trade with gold will end the loss of their investment.