Gold futures is one of the most popular traded contract in commodity market. Almost all the major exchanges facilitates to trade in gold futures. In India MCX(Multi Commodity Exchange) is the exchange for gold futures trading. Gold is a highly price volatile commodity and there are various factors which are responsible behind its price fluctuations. The value of gold as an asset is similar across the world. Having some commodities as a part of your portfolio is really helpful at the time of inflation. Trading in gold futures is similar to trading in equity futures. A buyer and seller met over exchange and agrees to buy and sell a specific quantity of gold at pre decided price and date . Both the parties are under obligation to fulfill all the requirements of contract as specified. To gain more advantage while trading in futures MCX Tips as suggested by market experts can be used.
Significance of trading in gold futures
Traders and investors trade in gold futures with a primary motive to hedge against future price risk. Those who are producers of gold can lock their selling price by taking a short position in gold futures . Also those who are consumers of gold can fix their purchasing price by taking a long position. By doing so buyers and sellers successfully hedge against future price risk and can make advantage from future price fluctuations. Also this type of trading is popular among speculators. By predicting the direction in which price movement will take place they take long or short position .
Factors which are responsible behind price movements of gold are discussed below:
1)Instability of central bank
Every country has its own central bank. Some of the most dominant of them are Swiss National Bank, Federal Reserves, Bank of Japan and more. Irregularities in functioning of bank make investors feel gold is safe medium of investment. As a result increased demand of gold arises which increases its value .
2)Interests rates
Like other bonds and savings account , gold does not pay any interest. However price of gold are affected by increase and decrease in interest rate. When interest rate increases price of gold may gets soften. As people begun to sell gold and supply of gold becomes more.
3)Supply v/s demand
This is one of the main factor which is responsible behind price fluctuations of gold. This precious metal continue to be precious even when its price fluctuates frequently. When the demand of gold is more then supply its price rises and when supply of gold is more then its demand its price gets declined.
4)Gold reserves
Central Banks hold gold and paper currency both in their reserves. When these central banks begun to buy gold in large quantities then they sell it leads to increment in price of gold. The reason behind this is paper currency supply increases and gold becomes scarce.
Traders must have commodity trading account with active segment MCX in it to trade in commodities like gold , silver and more.Having a good knowledge about market and performing a prior research work helps in earning desirable returns in commodity market.
Traders and investors trade in gold futures with a primary motive to hedge against future price risk.