subject: Writing an Essay on Gold Futures [print this page] Author: Thomas Hill Author: Thomas Hill
The concept of futures and futures markets, involving a legal binding contract for the delivery of a specified quantity of a commodity at a specified time in the future at an agreed price, originated in Chicago in the 1830s. The idea behind this was to make the prices even and give farmers, in particular, some way of hedging their crops well before harvest. After the American Civil War, the Chicago Board of Trade formalized this into the first real futures markets with standardized contracts. Gold futures contracts entered the scene much later, towards the end of 1974. The primary reason for this was the fact that trading in gold was non-existent as the United States was on a fixed price gold standard (The monetary system with a fixed price for gold and with gold coin either forming the whole circulation of currency within a country or with notes representing and redeemable in gold) until 1933. The futures trading in gold made its entry with the first gold futures contract trading in New York on the Commodity Exchange (COMEX) on December 31, 1974. Later, other American exchanges, including the Chicago Board of Trade, followed suit. In fact, there was also a trial run for gold futures with a 400-ounce; the traditional unit of weight for gold is the troy ounce, named, it is thought, after a weight used at the annual fair at Troyes in France in the middle ages. Although the metric system is used increasingly in mining and the gold business, the troy ounce remains the basic unit in which the price of 995 gold is quoted (One troy ounce = 31.1034807 grams, 32.15 troy ounces = 1 kilogram) (troy ounce = 480 grains, 3.75 troy ounces = 10 tolas; as known in India). The American exchanges, particularly, COMEX, has brought a new dimension to international gold trading. COMEX enjoyed significant advantages owing to its close affinity with New York's banks and financial institutions, which provided access to a worldwide clientele. COMEX later merged with the New York Mercantile Exchange (NYMEX) in 1994. Experts like Dr. Richard S Appel of financialinsights.com observe that the markets have entered a secular Bull Market in both metals. Although he says that we are at present only in the initial stages. In his column, "The Great Debate: Trading vs. Long-term Gold Investing," he writes, "Given the various reasons for the emergence of gold's bull market, and the sequence of events that have transpired since its birth, I am confident that these bull markets will not end for several years, at minimum." He says that the primary financial benefits of trading in a confirmed bull market is that it often gives the trader a form of leverage, and the hope that one can garner larger profits than if he only bought and held. The added leverage has the potential to substantially increase one's profits. For example, he says, "if a person purchases gold futures or gold call options they must only commit a small percentage of the underlying gold's value to initiate the trade. Then, if prices move higher, the profits that result may be a multiple of those that would accrue if he owned the physical metal." Unfortunately, this can act as a double-edged sword if the trade, even for a short period, goes against the trader. And, in isolated situations they may be devastating, he adds. He further comments that in the case of futures contracts the person is not only liable for his committed margin, but also for all losses that may occur while he holds the contract. The author is an expert in wiring custom essays/dissertations in the field of marketing and operations management. He has been with the company for some years as a senior writer.About the Author:
Thomas Hill is one of the senior staff writers at essayacademia.com, specialized in dissertation writing for master and Ph.D. students. He has been with the company for over five years. EssayAcademia provides you with professionally prepared free draft for your dissertations. You need to place order for completed paper once you are satisfied with draft, for which you need to make no payment at all. To avail this unique service visit essayacademia now and place order for professionally prepared free draft
