In the futures contract with gold price as the transaction target, the profit and loss of investors buying and selling gold futures is measured by the price difference between entry and exit, and the physical delivery is carried out after the contract expires.
What is gold futures hedging?
Gold futures hedging is buying (selling) in the futures market.
Gold futures contracts with the same spot quantity and opposite trading direction will be hedged by selling (buying) futures contracts at some time in the future, so as to make up for the actual losses caused by adverse changes in gold prices and maintain the spot operating costs at an ideal level.
In other words, hedging aims to avoid spot price risk.
Futures trading behavior. The logical principle of hedging. Hedging can preserve the value because the main difference between futures and spot of the same specific commodity lies in the different delivery dates, and their prices are influenced and restricted by the same economic and non-economic factors. Moreover, the futures contract must be delivered in kind when it expires, so the spot price and the futures price also have convergence, that is, when the futures contract approaches the expiration date, the difference between the two prices is close to zero, otherwise there will be opportunities for arbitrage. So before the maturity date, there will be arbitrage.