ALL THAT GLITTERS....

Gold has been accepted as a precious metal for thousands of years, but sometimes people are hesitant to invest in gold bars or coins.

Transportation and storage costs are considerable, as gold is relatively non-liquid. There are other ways to invest in gold, however.

Investing in gold stocks and gold mutual funds can be one of your options. They are more liquid than physical gold, but you must wait until gold mine company share prices go up to make a profit.

Another option is gold futures, an investment that can make money on market gains and market losses.

FUTURES TRADING

Futures trading is a contract between a buyer and seller at a futures exchange to buy or sell a commodity or currency. The commodity may be a market index, gold, oil and other commodities. Gold is one of the more popular commodities when it comes to futures trading, especially when we see the stock market fall rapidly. During an economic recession, we always see a positive movement of investors towards gold.

GOLD FUTURES

Futures contracts are used to trade gold in the short-term. They are rarely delivered as actual gold assets.

Investors can invest in gold futures, buy or sell contracts for future settlement or the delivery of fixed amounts of gold if needed. The futures contract calls for settlement in three months. Until the contract expires, it is traded back and forth at prices based on the spot price of gold. Investment in futures can leverage gains with a small investment, while at the same time have greater risks.

HOW TO INVEST IN GOLD FUTURES?

Make sure that you understand gold futures contracts. You must be confident that gold futures prices will continue to go up, then you set a time and a price in the future that you think will earn a profit.

Find brokers or a reputable company that specialises in gold futures. Talk to them and understand the risks associated with your investment.

It is recommended to buy gold futures with money that you can afford to lose. Even though you can use margin from the broker, you have to think about the risks. Start trading with small amounts until you gain experience.

WHAT ARE THE BENEFITS OF GOLD FUTURES?

Trading in gold futures is highly leveraged. You can make a lot more money than what you originally invested in the beginning, but you also can lose more. In the case of losses, they will close some of your position until the margin requirement is met.

WHAT ARE THE RISKS?

Gold futures contracts all expire at the same time. Traders do not want to take delivery of actual gold, so they all close out their positions, causing great price volatility. The cost of gold trading includes the spread between the buying and selling prices, the commission and interest on the borrowed money, and the margin.

WHO SHOULD INVEST IN GOLD FUTURES?

Futures trading is not suitable for everyone. If you have a high tolerance for risk, and a strong view on where gold prices are headed, you can buy and sell gold futures.

WHERE CAN I BUY GOLD FUTURES?

The main futures exchanges which trade gold futures are Comex in New York and Tocom in Tokyo. Also, you can access trading in the local market through the Thailand Futures Exchange PCL (TFEX).

ABOUT TFEX

TFEX is a subsidiary of the Stock Exchange of Thailand (SET). It was established on May 17, 2004 as a derivative exchange. The TFEX is governed by the Derivative Act B.E. 2546 (2003) and is under the supervision of the Securities and Exchange Commission (SEC).

TFEX serves as the exchange for the trading of derivatives. The market is operated upon a reliable trading infrastructure. The TFEX ensures a fair, orderly and transparent market.

Currently TFEX provides four products: SET50 index futures, SET50 index options, gold futures and stock futures.

TFEX has set Contract Specifications that investors have to follow, which are listed below.

TRADING COST

To invest in gold futures, you will incur some trading charges, such as commission fees. The Futures Industry Club (FI Club), the members or brokers of TFEX, has determined that commission on gold futures will be on a sliding scale. For one to five contracts per day, the commission will be 500 baht per contract;

For between six and 20 contracts, it will be 400 baht per contract and for 21 contracts or more the rate will be 300 baht per contract.

The FI club also sets the initial margin at 66,500 per contract and maintenance margin at 46,550 per contract.

BUYING OR SELLING GOLD FUTURES

TFEX has allowed 41 brokers to trade gold futures. Thirty-six of these are general brokers on the SET, and five are gold professionals who have been issued restricted broker's licenses for gold futures trading only.

However, all TFEX members can provide you with investment knowledge and advice on appropriate investments, also details of open trading accounts and the potential of gain and loss.

So, good luck!!!

Relate Search: Stock Exchange of Thailand, Securities and Exchange Commission, TFEX