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Gold Futures: Meaning, Benefits & Risks

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Created on
April 28, 2023


What’s Inside

Historically, gold has always been a valued commodity. As such, gold futures in India offer investors an option to leverage the metal’s inherent value.

Futures are essentially trading contracts where two parties agree on the sale of a commodity. However, the price is determined at that moment, while the delivery date is scheduled for later.

This enables both parties to avoid market volatility to some extent. For example, the seller can deliver the commodity at the agreed amount and date even if the current prices are lower. Similarly, the buyer can receive the asset when the market price for gold is higher than the initially settled sum.

Read on to learn more about the benefits and risks of gold futures investing.

What are the Benefits & Risks of Trading in Gold Futures?

There is some guesswork involved when investing in gold futures in India. Both parties are counting on the volatility of gold futures prices to benefit from the contract.

For instance, an investor can lose money if gold prices drop significantly between the agreement and the delivery date. In short, these contracts have a built-in differential. That’s why it’s best to keep an eye on gold futures charts to track the most recent metrics, including daily changes, low yields, etc.

There's also the risk of default, where one party sells the contract or withdraws from it because they may incur a loss. This would deprive the other involved individual of their due profit.

That aside, some of the advantages of investing in such contracts are as follows:

  • Allows investors to take high positions without significant upfront costs
  • Provisions for reducing the contract length to capitalise on immediate benefits
  • High liquidity potential

In addition, since delivery dates are set for later, gold futures eliminate the need for an investor to quickly find physical storage space for the asset. This can be useful for those just stepping into this market and unfamiliar with the peripheral necessities and responsibilities.

Wrapping Up

Investing in gold futures in India is one of the most effective ways to build portfolio value. However, as implied above, it is best to approach this with some financial discipline and market knowledge.

Fi Money offers users several secure investment options. Apart from the app's streamlined interface, there are multiple beneficial provisions that you can leverage.

For instance, our peer-to-peer-based 'Jump' feature enables you to beat inflationary pressure while earning a consistent 9% return annually on your initial investment. There's also our 'Smart Deposit', which allows you to save up for short-term goals while earning interest.

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Frequently Asked Questions

How can I trade gold futures?

Fi Money offers several investment options, including futures. The app also enables users to invest in mutual funds and stocks from the most prominent US companies. Merely sign up on the app to open a commodity trading account.

Are gold futures a good investment?

While investing in gold futures in India can be beneficial, some risks are involved. For example, exercising greater market leverage through low initial investments enables traders to use their capital better. However, if done incorrectly, the losses can exceed the initial sum. That's why it's best to approach this space with caution.

What are some advantages of trading gold futures?

Gold futures demand lower capital investment besides not needing physical storage space. There are also no management fees, and taxation policies are split between long-term and short-term capital gains.

What are some risks associated with trading gold futures?

Gold prices can fluctuate in some cases, and if it drops significantly, an investor can incur losses from the time of the agreement and delivery. In addition, trading in futures is often associated with a lack of respect for market leverage, where investors take massive positions without having the capital to back them up.


Investment and securities are subject to market risks. Please read all the related documents carefully before investing. The contents of this article are for informational purposes only, and not to be taken as a recommendation to buy or sell securities, mutual funds, or any other financial products.
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