The spot price of gold is determined by the following month's highest-volume futures contract. Sometimes, this contract may be for the current month, or it may take two or more months in the future. The spot price of gold trades close to 24 hours a day on weekdays and stops on weekends. At the most basic level, the spot price of gold depends on the balance between supply and demand in the international market.
If a lot of people sell or there is a big uptick in mining and manufacturing, the supply of gold increases and the spot price will fall. However, if many people seek to invest in gold, this creates high demand in the market and the spot price of gold will rise. The spot price of a troy ounce of gold is determined through OTC transactions, in which prices are negotiated between the buyer and the seller. When you look at the spot price of gold on a site like Kitco, you'll see both highs and lows.
These represent the highest selling price and lowest offer for that day. The price of gold is generally inversely related to the value of the United States dollar because the metal is denominated in dollars. All else being equal, a stronger U.S. dollar tends to keep the price of gold lower and more controlled, while a weaker U.S.
dollar is likely to drive up the price of gold due to increased demand (because you can buy more gold when the dollar is weaker). 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. The dollar and the desire to keep gold as a hedge against inflation and currency devaluation help boost the price of the precious metal. A number of different factors decide the future price, including the spot price of gold bars, shipping costs, and storage costs.
The dollar and gold tend to be inversely correlated (when the dollar rises, gold falls and vice versa). As mentioned before, the spot price of gold is the measurement of an ounce of gold, so its weight will have a big impact on the purchase price. The spot price of gold tends to rise briefly at the beginning of the year, cools during the spring and summer and then rises during the fall and winter. In addition, gold traders add a premium to purchases of gold bars at the market price to cover costs.
There are trends in the price of gold, and to get the most gold for your dollar, you must buy when prices are low. Therefore, gold prices may be affected by the basic theory of supply and demand; as demand for consumer goods such as jewelry and electronics increases, the cost of gold may increase. Gold and interest rates are generally inversely correlated (when rates rise, the spot price of gold falls). Any increase or decrease in the supply of gold will inevitably also affect the demand and price of gold.
However, since mines need to constantly find gold to maintain the price of gold, they have to dig more and more to find viable veins. Practically any type of crisis, a terrorist attack, political turmoil and even a recession can affect the spot price of gold. This global scale means that the spot gold market is open somewhere in the world 23 hours a day, from Sunday to Friday.