Trading gold futures does not require gold to exchange hands. A gold future describes an agreement by the buyer to buy a certain quantity of gold at a pre-determined price in a future time. Gold futures are one of the best way to gain leveraged exposure however can be volatile. Gold futures are a fascinating and important realm, but they do not deserve the level of mysticism and fear they seem to create. The futures priesthood that 'informs' gold-stock traders often takes facts out of context and also disseminates half-truths designed to sway sentiment.

Gold's importance in world markets makes COMEX Division gold futures and options an important risk management tool for commercial traders. Investors watch Comex data as an indicator of froth in the market. Trading gold futures securities happens largely on paper: a large portion of the gold bought or sold in the futures market never moves. Gold futures are typically traded by "speculators," investors who buy or sell gold futures but are not interested in the physical gold, versus "hedgers," who do value the gold by itself as an investment. Trading gold futures also has low commissions.

Gold options are also powerful and cost-effective investing instruments, which can be used to own desired quantity of gold in future, and can also be used to hedge price movements of gold that you hold. Every futures contract is for 100 troy ounces.

Prices in an organized derivatives market reflect the perception of market participants concerning the future and lead the prices of underlying to the perceived future level. The prices of derivatives converge with prices of the underlying at the conclusion of the derivative contract. Prices fluctuate based on supply and demand (although the twice-daily gold fix in London aids set a reference point for prices). The price of gold in the spot gold market-known as the "spot price"-is the price quoted for the spot gold, including delivery, to be paid two days following the date of the actual contract.

In closing, let me stress once more that gold futures are not a risk free financial commodity and should be considered judiciously. Investments should only be made with risk assets which is money you could afford to lose and it would not cause you to change your lifestyle in any way.

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