Gold futures contracts could be used as a hedging strategy. Depending on the situation, an individual can either take a long or short position in Gold Futures to hedge against unfavourable price movement; for example, if an individual needs to purchase approximately 100 gms of gold in one month and the gold price is volatile, the individual could take a long position in Gold Futures (i.e. buy Gold Futures). Similarly, if a jeweller wants to lock in a price for a one-month delivery and the price is not fixed, the jeweller can hedge the adverse price movement by taking a short position in Gold Futures (i.e. sell Gold Futures)

Gold futures are a popular financial instrument for hedging against market uncertainties and mitigating risks associated with price volatility. Investors and businesses, especially those involved in the gold industry, utilize gold futures contracts to protect themselves from adverse price movements in the underlying asset, gold.

Hedging with gold futures involves taking an offsetting position to an existing exposure, aiming to minimize potential losses. For example, gold producers might use futures contracts to lock in a favorable selling price, while jewelers could hedge against rising gold prices to secure a stable purchasing cost.

Gold's reputation as a safe-haven asset makes it particularly attractive for hedging during economic uncertainties or geopolitical tensions. By using gold futures, market participants can maintain price stability, safeguard profit margins, and navigate unpredictable market conditions more effectively. However, effective hedging requires careful analysis, understanding of market dynamics, and consideration of the specific risks faced by each participant in the gold industry.