Let’s suppose you want to buy gold because you believe that the price of gold will rise.
You could buy gold ingots, store them, wait for them to go up in price and then sell them at a profit.
But you have to be sure that the gold you buy is pure, you have to find a place to store it, you have to provide a security transport it to the Vault and other such hustles.
A far better way to invest in gold would be to buy gold futures from the commodities exchange.
How do you do that? when you buy gold futures contract you undertake to do three things.
- Buy the amount of gold specified in the contract
- Buy at the price specified in the contract
- Buy at the expiry of the contract
This could be after 1 month, 2 month, 3 months or so on.
Of course, if you sell the gold futures contract before it expires and you don’t have to worry about actually buying the gold.