The gold spot price refers to the current price of gold. If, for example, you were about to buy gold there and then, the spot price is what you would pay for the specified amount.
So, why do we use the term spot and how does it differ from other ways of valuing gold? If you’ve ever wondered what separates spot price from other asset valuations, our guide is here to set the record straight. Use the links below to navigate or read on below to learn more.
- What Exactly is a Spot Price?
- How is the Gold Spot Price Determined?
- What Affects the Gold Spot Price?
- What’s the Difference Been Spot and Futures Gold Pricing?
A spot price is an immediate valuation of how much it would cost to acquire an asset. Think of it as a right-now price, which shows the value of a commodity if you were to buy it that instant.
We use spot pricing to differentiate current and future values. For example, the spot price of gold could be very different from the futures price; we’ll talk more about the relationship between these later in the guide.
The gold spot price, specifically, refers to the price it would cost to buy one ounce of gold that instant. And since gold values can fluctuate considerably, the per-ounce spot price can vary from one day – even hour – to the next.
So, how are gold spot prices determined? This is where things can get a little technical, so bear with us while we explain.
Gold spot prices are based on previous futures contracts, which is essentially a determination of how much gold is likely to cost in the coming month or months. The futures contracts themselves are affected by a range of factors, not least the volatility of gold values during a specific period.
Why are futures contrasts used to determine the gold spot price? Essentially, it gives an indication of how much gold is currently worth based on future values and demand, which are taken from historic economic data.
For example, at the time of writing, the gold spot price is $1,852 per ounce. To reach this figure, you need to look at previous future prices contracts, which give a clear indication of how much an ounce of gold is likely to cost in the months ahead.
Typically, to refine the gold spot price, the futures contract with the highest volume is used to calculate the value. Referred to as the spot month, this is the time when gold trading is predicted to be at its highest, based on a range of factors including historical trading data.
As touched on above, the gold spot price is subject to frequent change, so the price you see today is unlikely to be the same the next. Indeed, in periods when the value of gold is highly volatile and liable to move, the spot price can change hourly, so traders must keep their finger on the pulse to buy and sell at the right time.
So, what exactly affects the spot gold price?
While gold is generally considered one of the safest and most predictable asset classes, its value can still be affected by a range of external forces. From economic data and forecasting based on historic sales patterns, to geopolitical events, comments from high-profile investors, and unanticipated action or involvement from the Federal Reserve; the value of gold can rise and dip based on several key influences.
What controls the gold spot price, monitoring and discovering key trends that affect its per-ounce cost day-to-day? The answer lies in price discovery and trading platforms, like the New York COMEX exchange.
Such exchanges are designed to monitor gold around the clock, allowing traders to see real-time gold spot prices wherever they’re based around the world. The COMEX exchange is also where investors trade futures contracts, which effectively offer some security over the future price of gold for a specified amount.
Remember, gold is traded on an international scale, so over a 24-hour period, gold transactions are happening in different regions around the world. Having a standard gold spot price ensures global trading can operate smoothly around the clock.
When looking at current gold prices on market sites and exchange platforms, you might notice a spot price and a futures price. These figures are often different, so what sets them apart?
The spot price is the per-ounce cost of gold if you were to acquire it right now. The futures price, on the other hand, refers to how much the same quantity of gold would be for a period in the future – taking into account interest rates, contract dates, and the strength of market demand at the requested time of acquisition.
The difference between the spot price and future price is often expressed as the forward rate. This allows traders more insights into the best time to buy gold.
Glint is a payments platform that enables its clients to buy, sell, save, send and spend real allocated gold and other currencies. Glint is not a trading platform.
At Glint, we make every effort to demonstrate a balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.
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