However, physically trading gold can pose many problems for investors, which makes
trading in gold futures a much more viable option for individuals who wish to break into this market.
According to Kitco News, citing Commodity Futures Trading Commission (CFTC) data, money managers increased their speculative long positions
in gold futures by 34,928 contracts to a total of 183,080 for the week ended March 27.
At the same time,
speculators in gold futures were adding to the risk of a steep downward price adjustment by stubbornly maintaining an extremely high net - long position.
Furthermore, a
decline in gold futures positions at the COMEX futures exchange tells us little about the long - term trend of the gold market.
Sinclair should have them take out $
1M in gold futures and DELIVER those ozs as payment instead of $ 1M in cash as the NPV only be $ 750K by then.
(Less than 1 % of open
interest in gold futures — which itself represents a small percentage of the global gold market — is actually settled in physical gold bullion.
And though the extreme leverage
inherent in gold futures enables their speculators to wield outsized influence on short - term price action, investors» capital massively dwarfs the speculators».
We saw selling
in the gold futures market in early October, causing gold to go through some technical support levels, down through $ 1,270.
Without GLD to invest in, I wonder if I would have had the inclination to learn about investing
in gold futures or physical gold.
Trading
in gold futures can provide investors a viable alternative to investing in physical gold bullion, and a useful hedge against inflation.
An important advantage to trading
in gold futures is the fact that because they are traded at centralized exchanges, futures contracts offer more financial leverage, flexibility, and financial integrity as opposed to physically trading this precious metal.
For example,
in gold futures trading, the margin varies between 2 % and 20 % depending on the volatility of the spot market.