GOLD AS A COMMODITY: FUTURES & OPTIONS

Perhaps no other market in the world has the universal appeal of the gold market. For centuries, gold has been coveted and traded for its unique blend of rarity, beauty, and near indestructibility.

Nations have embraced gold as a store of wealth and a medium of international exchange; individuals have sought to possess gold as insurance against the day-to-day uncertainties of paper money. COMEX Division gold futures and options provide an important alternative to traditional means of investing in gold such as bullion, coins, and mining stocks.

The United States first assigned a formal monetary role for gold in 1792, when Congress put the nation's currency on a bimetallic standard, backing it with gold and silver. During the Great Depression of the 1930s, most nations were forced to severe their currency from gold in an attempt to stabilize their economies.

Gold formally reentered the world's monetary system in 1944, when the Bretton Woods agreement fixed all the world's paper currencies in relation to the U.S. dollar which in turn was tied to gold. The agreement was in force until 1971, when President Nixon effectively cancelled it by ending the convertibility of the dollar into gold.

Of all the precious metals, gold is the most popular as an investment. Investors generally buy gold as a hedge or safe haven against any economic, political, social, or currency-based crises. These crises include investment market declines, inflation, war, and social unrest. Investors also buy gold during times of a bull market to gain financially.

Investment in gold can be done directly through ownership, or indirectly through certificates, accounts, spread betting, derivatives or shares.

Other than storing gold in one's own safe deposit box at a bank or in your home, gold can also be placed in allocated (also known as non-fungible), or unallocated (fungible or pooled) storage with a bank or dealer. In the case of the latter going bankrupt, the client will be unable to claim the gold and would become a general creditor, whereas gold held in allocated storage should be returned to the client in full. However even with gold held in allocated storage, many gold bugs would still choose their storage provider carefully, making sure of high net worth, with some preferring an offshore bank or storage facility.