Gold Rate Today: Prices move down! What is gold futures contracts? Avoiding the risk explained

Gold Rate Today: Investors should rejoice as gold and silver prices have somewhat declined following a sharp increase. If you'd like to invest, you can buy these precious metals. Gone are the days when women would accessorise their clothes for special occasions with gold jewellery. Institutional investors are also investing in the asset due to its long-term profitability and the erratic growth rate of the economy. Additionally, it mitigates losses sustained during times of stock market volatility by acting as a diversifier. A common illustration of a liquid asset that can be useful in uncertain times is precious metal. The yellow metal protects against depreciation of currency and inflation. In India, the price of a gram of 22-karat gold is currently Rs 5,775, while a gram of 24-karat gold costs Rs 6,300.

What is gold futures contracts and what should you do to avoid the risk?

Gold futures contracts are available from the NSE, BSE, and Multi Commodity Exchange (MCX) in India. It is primarily used as a hedging tool against price risk by companies involved in the production and trading of gold. The exchanges also provide the fold futures in small-scale denominations to meet the needs of each investor. Trading can be difficult even for experienced investors who have a strong understanding of derivatives. You can purchase and sell gold at a later time by entering into a gold futures contract. Although the value is determined at the time of transaction, the gold contract is settled on the maturity date. To reduce the risk of volatility, investors should keep a margin until the settlement. Depending on the expected volatility in the amount, the range can be between 4% and 10%.

Price of gold in some major cities

Gold Rate Today: Checkout the rates on MCX

The historically low correlation of gold with other financial assets makes it a popular choice among investors as a hedge against potential economic downturns. Rising gold prices usually result in lower bond yields. With a slight decrease of 0.25 percent, gold futures with a February 5, 2024 maturity date were trading at Rs 62300 per 10 grams on the MCX. The price of silver futures, which mature on March 5, 2024, saw an decrease of 0.69 percent, and were trading at Rs 74557 per kg on the MCX.

Disclaimer: (This information is provided solely for informational purposes. It is important to note that investing in the market or a business idea involves market risks. Before investing money as an investor/ owner/ partner, always consult an expert. DNP News Network Private Limited never advises to invest money on stocks or any specific business idea. We will not be liable for any financial losses.)

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