Gold can be bought and sold in the futures market in India. In fact, a lot of analyst suggest buying gold in the futures market if you are looking at a short to medium term investment plan. This would prevent you from incurring expenditure with regards to locker charges that you would need to buy and store when you invest in physical gold, in addition to other problems like dealing with theft.
Gold in the futures market can be bought in the same manner as you buy shares. You need to open an account with a broker and tell him you want to trade in the commodities market. This would open up options like gold, crude oil etc., for buying and selling.
Once the broker opens an account you can buy gold and there are various categories of gold that you can buy. You can buy gold petal, gold guinea etc. Commodities in India are traded on the MCX and you can buy the same from a broker through MCX.
Most of the gold contracts are three months contracts, which means you need to settle your contract before the expiry.
Let's say you buy gold Petal for Sept 30 delivery. This means you have to settle the contract by selling the same before Sept 30. This would mean you square up your position.
Advantage of buying gold in the futures market
There are many advantages of buying gold in the futures market. One is that you do not have to worry about theft. This is because in the futures market gold would be held in the electronic form. What is important that these gold prices would be tracking the actual prices of gold. So, you are getting to buy gold tracking real gold prices.
Secondly, you do not have to bother about incurring locker and other charges at the bank. Also, gold in the futures market has good liquidity, when you want to buy and sell the same. The one big advantage is that there is transparency with the price and you do not have to worry about checking the price with different jewellers as is the case with physical gold.
There are some disadvantages of buying gold in the futures market. One of the biggest is that you cannot take a very long term view. In the sense if the contract expires in three months you need to settle the same and take a fresh position.
This is perhaps one of the biggest drawbacks of investing in gold in the futures market.