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Gold Futures

A futures contract is a financial agreement to buy or sell a specified quantity of a certain commodity at a designated time in future, at an agreed price set at the time the contract is established. 

Originally, gold futures contracts were designed to protect large industrial users of the precious metal from adverse price swings by enabling them to obtain or supply a steady quantity of gold at established prices - prices at which their respective businesses will be able to make a profit. 

Members of the public buying futures are mostly speculators betting on the rise and fall of the price of gold. They buy gold futures when they believe that the price of gold will rise and sell them when they think it will fall. Gold futures traders don't actually have to own or take delivery of the physical gold. By opting for cash settlement, they can just pay (or receive) the valuation difference in cash on delivery date. 

The profit potential as well as the associated risk can be very high as futures trading account typically provide significant leverage. For example, the investor can control $100 worth of gold by paying only $10 upfront, with the remaining $90 on loan from the brokerage.

As the risk of trading gold futures can be very high, especially for those untrained in the intriques of options and futures trading. Investors are advised to exercise due caution if they wish to venture into this highly speculative endeavor. Less aggressive investors seeking to enter the gold market are recommended to stick to less risky means like buying gold ETFs or gold mining stocks.