Buying Gold Futures

 

Close-up of Gold Bars ca. 2003

1.Think ahead. Those willing to absorb a bit more risk decide to invest with gold futures. However, it is important to note that it isn’t so much “investing” as it is speculating, which equates to gambling in some respects.

-Term of Investment: Varies – In general, investing in gold future is like making a short-term prediction of what you think the price of gold will be in the near future. However, many savvy investors invest and re-invest in gold futures for many years.

-Nature of investment: High risk – There is high volatility associated with gold futures and many inexperienced investors will lose money on them.

-Profile of Investor: This is primarily for a seasoned and experienced investor; very few novice investors will make money in gold futures.

2.Open a futures account at a commodity trading firm. Futures allow you to control a higher value of gold than you have in cash.

3.Buy a gold futures contract. Gold futures are legally binding agreements for delivery of gold in the future at an agreed upon price.

4.Wait for the contract to end. Then you can collect your earnings or pay your losses. An investor can exchange a futures position for physical gold, referred to as EFP (Exchange for Physical). However, most investors offset their positions before their contracts mature instead of accepting or delivering physical gold.