Although yesterday was a holiday here in the U.S., the markets marched on around the world, with gold reaching an important landmark: It hit $1,000 an ounce, the first time it has been at that level since February. Actually, there's a distinction to be made here, because if you went to buy a chunk of gold on Monday that weighed an ounce, you'd have paid $998.25 for an ounce. What happened is that gold futures went to $1,000 an ounce. If you bought a contract for delivery of an ounce of gold in December, you had to pay a thousand dollars.
Why would you choose to buy a futures contract rather than gold itself? Mostly, it's because futures contracts can be leveraged. Exchange margin rules allow you to control one contract for $4,050, so that $4,050 can give you control over a much larger amount of gold - say $50,000 or more - in December. And since the physical gold never changes hands, there's less concern about logistics, security, storage, etc.
One estimate I've seen indicates that there is 20 times as much trading of gold futures as there is of actual gold. This will continue to be an important diversification opportunity for many investors.
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