How to invest in gold

(Reuters) - Gold prices surged to a record high of $894.90 an ounce on Thursday and traders and analysts say the market has potential to extend gains and set new peaks in coming months.

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 $13 billion in trades passing through London'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.