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Price of an ounce of gold

What are Gold Futures

The investor has various choices of investment in gold after he finds the price of an ounce of gold in the market on that day.  He can buy stocks of a mining company or invest in futures or ETFs. IN the case of gold futures, it is quite easy, as there is no physical exchange of gold in this case.  The buyer agrees to buy a certain amount of gold at a fixed price at a fixed date in the future.  This is known as the futures contract.  However, it is not necessary that the buy pays the entire amount of the gold value at that time.  He can just pay up a small percentage on that day, according to the price of ounce of gold on that date.

The Buyer and the Seller’s position

The seller is in what is known as the short position, whereas the buyer is said to be in the long position.  The seller is banking on the hope that by the time the date of payment of the buyer is reached, the price of one ounce of gold would have decreased from the pre-determined price, which will leave him with a profit.  The buyer, on the other hand, is hoping and speculating that the price of ounce of gold would have increased from the pre-determined price, in which case he has to pay less.  The market price of gold for that date is calculated and cash is deposited by the buyer if the seller has made the profit and by the seller if the buyer has made the profit.

Risk Tolerance calculation

You can enter into such gold futures contract through a future broker or the other alternative is to invest in a futures fund.  You may also need to identify how much risk you can afford to take, in order to know how much to invest.  The gold futures market is liable to a lot of volatility, as there are many factors that can affect the price of one ounce of gold, such as the political environment, the economic conditions and so on.  Proper research has to be done and you can fix the date of settlement at any time, as any span of time can be chosen for your futures contract.  You will also need to open a trading account with the Brokerage Agency and will have to invest an initial amount which is less than the value of your gold futures contract.  A brokerage charge is also imposed in some cases.


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Price of an ounce of gold


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