What is Gold?
Gold is the most malleable of all metals; a single gram can be beaten into a sheet of 1 square meter, or an ounce into 300 square feet. Gold leaf can be beaten thin enough to become transparent. Gold is a good conductor of heat and electricity and reflects infrared radiation strongly.
The world consumption of new gold produced is about 50% in jewellery, 40% investment, and 10% in industry.
Uses of Gold
Gold can be used in a large array of products, this is due to it being highly malleable, conductive and anti corrosive.
Products can include but not limited to:
- Sheet metal
- Gold leaf
- Colouring agent in glass
- Photography toners
- Reflector of electromagnetic radiation (satellites)
Risks of Gold
Like any futures contract, there is always the possibility that the underlying asset i.e. gold will move in the opposite direction to which you hold your contract. For example: you have taken a long position (expecting the price of gold to rise), if this were to happen and the gold fell in price, your long position in gold will decrease in value.
With any commodity, supply and demand will affect the price dramatically if there is a change, this risk is one that should be monitored on a regular basis and adjusted to suit your risk parameters.
Mining of metals has an inherent risk with the level of costs associated with extracting the product from the earth. This can include, but not limited to: the cost of oil to fuel machinery, cost of labour or new tax regulations being implemented.