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Category: Glint's Helpful Hints

Helpful Hint: Spot on

What's the difference between the spot price of gold and the futures price – and which one matters more? All markets work on the basis of the pri...

12 January 2023

Gary Mead

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What’s the difference between the spot price of gold and the futures price – and which one matters more?

All markets work on the basis of the price you can buy or sell at today, right now – that’s the spot price. The spot price is also a live price, so it constantly moves, depending on whether there are more or fewer buyers than sellers.

Markets – and in this respect gold is no different from say soybeans or coal – also need to account for those who might wish to buy or sell in the future. So the futures price is just that – what price you can buy or sell at in three months or three years from now. Futures’ prices are, however, paper.
What should we pay attention to, the spot or futures price?

The trading of futures is very tricky indeed. The spot price is usually below the futures price, but it helps determine the futures price because it sets a marker.

So pay attention to gold’s futures’ price but, aside from the fact that this is a paper market (not dealing in physical gold, unlike Glint), the futures price can only give you an indication of the general sentiment underlying the trend.

So both prices are useful, but if you are looking for an immediate and current price the spot price is the one.

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