How does the gold futures market?

There are two fundamentally Gold Bullion markets of gold and silver. For the purposes of this discussion assumes that the silver market is sufficiently similar to the market to make an analogy of the gold. We dive publish a difference between silver and gold market in the future

The two main markets that determine the price of gold, the spot market and futures market. The point is the market whereTrade Gold for immediate delivery. Despite the name, not every transaction that takes place in the market and is a physical exchange of goods, but who has access to the local market should be able to meet the demand the supply of gold.

The gold futures market is the market for gold at a future date. Gold futures trading on the COMEX (Commodity Exchange) in New York, now part of the CME (Chicago MercantileExchange). The gold futures contract is used by speculators and institutions. A futures contract is an agreement to provide a standardized or receive a certain amount of gold at a certain time in the future. COMEX gold futures contract specifies delivery of 100 ounces of pure gold, 995. The nominal value of the contract, the basis of an ounce gold price of $ 139,000.00 is $ 1390/Troy. (An Imperial, traditionalOunce = 28.35 grams, one troy ounce = 31.10 grams)

In early November 2010, CME launched the new gold futures contract, the e-mail account. The mail account is the same as the traditional gold futures contract, except trades notional rate of 10 troy ounces of gold. If you make or take delivery of this contract, 10 ounces of gold changing hands. The futures contract continue and can be thought of as a traditional fractional gold, so 10E-micros reflect a traditional contract.

The contract allows an operator to take a position that benefits from an increase in the price of gold or a price drop. Futures contract should be uniform and can be short or long. If one is long, then they will actually buy gold, which own the assets and benefits, if the price increase. If a contract is the sale of a gold and "get a moment, then effective, to sell gold. If the price drops, then you can buythe gold back for less than you paid. It is "buy low, sell high", but in reverse order.

futures markets are predicting. The participants try to anticipate where the price of gold at the end of the contract and invest accordingly. The futures price of each product is the speed on the basis of price expectations and interest. Interest rates matter because there is an opportunity cost of investing money in a futures to be. The money will not earnThe interest in a bank account so that the opportunity cost in view of the futures price of gold by the market. While interest rates are currently low and a fraction of the price factor for our purposes we can ignore the impact of interest rate.

Although the futures contract for physical delivery of 100 troy ounces of gold, most of the contracts are closed prior to delivery process takes and not the norm, that gold is exchanged physically.Even among the most important gold-users, traders and investors, gold is replaced by electronic transfer on, while the physical product remains firmly stuck behind institutions at different levels of security for large, well-protected banks and vaults. If a contract take delivery of gold, it actually receives a mandate to deposit gold in a clearing.