Investments made with gold

Exchange-traded gold

Gold trading and exchange can be done in the form of stock exchange securities. This is the case in many countries such as France, Hong Kong, South Africa, Japan and the United Kingdom. United States and Australia also have stock exchanges for trading in this commodity. These security forms are also referred to as Exchange Trade Funds which track gold prices as a fraction of the gold price.

These securities have the advantage of physical gold backing unlike other derivative products and assets. They have played a large role in the gold market since they represent more than 30% of investments that can be identified.

Gold futures

These are firm commitments in the form of contracts outlining responsibility for gold delivery in the specified purity and quantity at the agreed price and date to an investor. After the buyer pays the initial money or margin, he has nominal ownership of the gold value mentioned in the contract. Although this is a risky affair, the leverage can amount to significant profits.

Gold futures prices tend to be a little higher when compared to the gold spot prices since they attract borrowing cost as well as charges for storage by the firm. These futures are traded in Dubai and India as well with the largest traders who are based in New York.

Gold Options

Gold options give the holder the right to buy and sell a specific gold quantity. However, this does not mean that the holder is obligated to do so and when the holder of the option decides to sell, he or she must sell or buy at a specified date and at a price that is predetermined. The price in this case depends greatly on the spot price of gold, interest, volatility of the price of gold, the agreed-upon price and the amount of time left until the trade takes place. As in contracts, the options give leverage to the holder at a substantial amount. These gold options can be traded by means of brokers.

Warrants

This is another way investors can obtain gold. These warrants are normally issued by investment banks to give an interested gold buyer or investor the right to buy at a specific day and price. The buyer has to pay premiums and in turn gets leverage on the asset and price. These options make it possible for all interested parties to have a piece of the gold investment.