Of all the precious metals, gold is the most popular as an investment.^[1] Investors generally buy gold as a hedge or harbor against economic, political, or social fiat currency crises (including investment market declines, burgeoning national debt, currency failure, inflation, war and social unrest). The gold market is subject to speculation as are other markets, especially through the use of futures contracts and derivatives. The history of the gold standard, the role of gold reserves in central banking, gold’s low correlation with other commodity prices, and its pricing in relation to fiat currencies during the financial crisis of 2007–2010, suggest that gold behaves more like a currency than a commodity.

Gold Futures & Margin

Delaying the settlement creates the need for margin, which is one of the most important aspects of buying (or selling) a gold future.

Margin is required because delaying settlement makes the seller nervous that if the gold price falls the buyer will walk away from the deal which has been struck, while at the same time the buyer is nervous that if the gold price rises the seller will similarly walk away.

Margin is the downpayment usually lodged with an independent central clearer which protects the other party from your temptation to walk away. So if you deal gold futures you will be asked to pay margin, and depending on current market conditions it might be anything from 2% to 20% of the total value of what you dealt.

Our Opinion
It may come as a surprise that we do not often venture a strong opinion as to the future direction of the gold price.
We do not pretend to be experts at prediction of market prices, indeed we believe that there are very few people who could claim consistent success at predicting future gold price movements.
We also prefer to point out obvious and potential fundamental factors, and allow our customers to form their own judgements.
As at February 2000, we believe we can envisage one important factor which may have a significant effect on the gold price over the next few years.

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