Factbox: How to invest in gold and key price drivers

bar gold

(Reuters) - Gold prices rallied to record above $1,398 an ounce on Monday on concern of a continued weak dollar trend after the U.S. Federal Reserve last week acted to resume buying Treasuries.
Following are key facts about the market and different ways to invest in the precious metal.
HOW DO I INVEST?
SPOT MARKET
Large buyers and institutional investors generally buy the metal from big banks.
London is the hub of the global spot gold market, with more than $21 billion in trades passing through the city's clearing system each day. To avoid cost and security risks, bullion is not usually physically moved and deals are cleared through paper transfers.
Other significant markets for physical gold are India, China, the Middle East, Singapore, Turkey, Italy and the United States.
FUTURES MARKETS
Investors can also enter the market via futures exchanges, where people trade in contracts to buy or sell a particular commodity at a fixed price on a certain future date.
The COMEX division of the New York Mercantile Exchange is the world's largest gold futures market in terms of trading volume. The Tokyo Commodity exchange, popularly known as TOCOM, is the most important futures market in Asia.
China launched its first gold futures contract on January 9, 2008. Several other countries, including India, Dubai and Turkey, have also launched futures exchanges.
EXCHANGE-TRADED FUNDS
Media coverage of high gold prices has also attracted investments into exchange-traded funds (ETFs), which issue securities backed by physical metal and allow people to gain exposure to the underlying gold prices without taking delivery of the metal itself.
Gold held in New York's SPDR Gold Trust, the world's largest gold-backed ETF, rose to a record high of 1,320.436 tons in June. The ETF's holdings are equivalent to more than half global annual mine supply and are worth some $56.2 billion at today's prices.
Other gold ETFs include iShares COMEX Gold Trust, ETF Securities' Gold Bullion Securities (GBSx.L) and ETFS Physical Gold (PHAU.L), and Zurich Cantonal Bank's Physical Gold (ZGLD.S).
BARS AND COINS

Posted in: