Spot gold is the price you can purchase or sell gold right now instead of at a specific time in the future.
This price is essential for gold market enthusiasts since it influences their decision on whether to buy or sell their investment.
In this post, we’ll explore the meaning of the gold spot price, how the spot price is determined, the difference between spot gold and gold futures, and the places to buy spot gold.
Let’s dive right in!
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What Does Spot Gold Price Mean?
Spot gold price refers to the amount of money a person pays immediately they receive the physical gold.
Often, the gold price direction relies on this reference price. Unlike other commodities, gold price significantly depends on sentiments rather than the fundamental laws of demand and supply.
The significant factors that determine spot gold price include.
- The extent to which investors are currently willing to take on risk
- The strength or weakness of the US dollar
- The current or predicted level of interest rates
- Demand for jewelry
- Gas prices
- Equity markets
- The central bank
Traders usually quote the price of gold in US dollars. However, there is a live gold chart in each major world currency, with their relative weakness and strength compared to other currencies.
Considering how vital gold is, the gold spot price can help us determine the strength or weakness of the world’s economy.
How is the Spot Gold Price Determined?
Do you ever find yourself wondering how the spot gold price is determined?
Every day, the London Bullion Market Association (LBMA) sets the gold price, also known as the London Fix, based on the costs of gold futures trading.
Gold futures are an agreement to supply the metal at a future date. As global gold trading moves from London to New York, the traders adjust the London fix price to reflect trading in gold futures on COMEX, a member of the New York Mercantile Exchange.
Since most transactions are online and don’t require immediate physical gold delivery, future contract transactions are responsible for establishing the current spot price for gold.
The typical unit for measuring gold is troy per ounce. To calculate the market value of the good, convert the price per troy ounce to the price per gram.
Before you begin, you should always keep in mind that one troy ounce equals 31.1 grams.
Here are the steps to follow when determining the gold spot price.
- Research the current gold price in the US market. For instance, the price may be $1400 per troy ounce.
- Convert the price to US dollar per gram by dividing the price per troy ounce by 31.1g. Dividing $1400 by 31.1 gives us $45.02 per gram.
- Choose the number of grams of gold that your company wants to acquire or sell. For example, let’s say you want to buy or sell 10 grams of gold.
- Decide how many grams of gold your company wishes to purchase or sell. Let’s say your company wishes to sell or buy 5g of gold.
- To determine the overall market worth of the gold, multiply the quantity you wish to buy or sell by the gram price. In the aforementioned example, multiply 10 grams of gold by the gram price of $45.02 to obtain a market value of $450.2.
Gold Futures vs. Spot Gold: What’s the Difference?
Gold futures and spot gold have major differences, as discussed below.
- Normally, spot gold is delivered immediately, while gold futures take about 2-3 months before it’s delivered.
- When buying spot gold, you need to make payments immediately, whereas you can make payments one to two days after signing the gold futures contract.
- The spot gold price is the current market price. On the other hand, traders usually calculate the futures gold price after considering several factors, including spot gold price, inflation, storage risks, and the time between purchase and delivery. As a result, futures gold becomes more expensive than spot gold.
- Spot gold is less risky since you’re paying for the face value of the gold. However, futures gold is associated with a high risk since there is uncertainty as to whether the price of the gold during delivery will be lower or higher.
- Unlike futures contracts with fixed open and closing times, the spot gold market operates independently and continuously throughout the day.
Where to Buy Physical Gold
Are you interested in buying gold? Below are some places where you can find quality gold to invest in.
OneGold is an online platform that allows you to invest in precious metals, including gold, silver, and platinum. The best thing about this platform is that it allows you to complete your transaction online.
After buying the metals, you can store them with one of the reputable Canadian or American vaulting partners on the marketplace.
Vaulted is a mobile platform that allows you to purchase gold bullion from the comfort of your home. Using this platform is quite easy.
With just a few clicks, you can purchase any amount of gold you want, and the platform will issue you with a gold certificate indicating the amount of gold you own.
One of the major advantages of buying gold from this platform is that it has an open pricing structure. Buying gold from the platform is also relatively cheap since it eliminates the need for middlemen.
JM Bullion is an online retailer dealing with gold and other precious metals like silver, platinum, copper, and palladium coins.
Most people prefer this platform to buy gold since it deals directly with distributors and mints, offering customers quality goods.
The gold spot price is important when deciding whether to buy or sell your investment. If you depend on your gold asset as a retirement plan or hedge against inflation, it’s essential to know when the spot price is low and invest then.
The following are some of the frequently asked questions.