The value of spot gold changes daily, depending on the market. In general, spot interest rates on gold are cheaper than gold futures rates, since there is no need to extrapolate when buying gold in spot. What they see is what they get, without market predictions. When you trade in the spot gold markets, the Gold Spot Price you see shows the current market value of the asset. Unlike futures contracts, spot gold markets are decentralized and are traded 24 hours a day, while futures trading has specific opening and closing times.
It's important to understand what the spot price actually means. The spot price is simply the price at which a product can be processed and delivered at this time. This contrasts with futures or futures contracts. The spot price of gold refers to the price of an ounce of gold and the spot price of silver refers to the price of an ounce of silver.
Gold and silver must meet specific fineness requirements. These reference prices, known as fixed gold prices, are usually set twice a day and are based partly on what is happening in the gold spot market and partly on the activity of the gold futures market. But what is the spot price? It's a security that gold traders and holders are constantly evaluating online, including investors who buy gold instruments, such as ETFs and gold coins. By investing in gold coins, you are buying a physical item with a gold price that is affected by the futures markets, apart from normal supply and demand problems.
Both spot gold and gold futures markets have their own advantages and disadvantages, such as the ability to see volume in the futures markets and centralized exchange, compared to the OTC nature in spot markets. The spot price of gold is commonly used in gold bullion transactions, and trading activity takes place in numerous financial centers around the world, from Hong Kong to New York, London and Delhi. An analysis of the history of the price of gold over the past 30 years shows that the precious metal does especially well in times of uncertainty, as investors seek safe investments. In fact, declines in the current price may be a reason to buy more gold if you believe that long-term trends are still bullish.
In these cases, even small news or other factors can dramatically change the current spot price of gold. Physical gold transactions are linked to the spot price of gold, while paper gold transactions play a role in determining that price. The December gold futures contract has the highest volume and would therefore likely determine the spot price. The table below provides a summary of the trading requirements between gold futures and spot gold instruments.
Since the vast majority of transactions are electronic and do not involve the immediate physical delivery of gold, future contract transactions play an important role in determining the last spot price of quoted and updated gold. Active gold traders and speculators will buy and sell contracts throughout a trading cycle, sometimes representing thousands of ounces of gold. Another way of saying it is that when you buy gold coins at the current spot price of gold, you are paying a price that actually represents that expectation of future value, rather than the actual momentary price of a physical transaction. All of this means that, in a bit of market alchemy, the spot price is actually a mix of these factors and influences in the short and long term.
