The spot price of gold represents the current rate at which the yellow metal can be bought or sold at a specific time and place. This rate defines the explicit value of gold in the markets.
Gold Spotis an off-exchange market. This means that market makers don't pair buyers and sellers in one bag, but rather unite on their own terms.
The main spot markets are in London, New York, Zurich and China, and the price of gold is in the local currency. Every spot market has a list of accepted evaluators (those who determine value), and gold bars bearing these marks are considered fungible if delivered correctly. In addition to continuously monitoring the prices of real transactions, London sets two fixed prices each trading day that are used worldwide as a reference value. The variety of factors that influence gold prices means that no one person has the ultimate authority over the price of gold.
In fact, many small companies that buy gold from individuals believe that the spot price is the price of the last physical transaction or the current price of physical ingots. However, official spot gold prices are used as a standard reference for individual transactions outside the official spot gold market. Although purchases or sales to large bullion brokers usually range from five percent above and five percent below the spot, most use the current spot price as the reference value for gold. If you could buy raw gold before it was minted into ingots or coins, you would theoretically pay the price in cash.
Another attractive aspect of spot gold trading is that, just like in futures trading, there is no need to maintain the physical metal; a piece of paper is enough here. Spot gold trading has several other benefits and trading techniques can be customized according to your risk preferences. Learning how to buy gold requires understanding these factors and how they affect the price of gold. It is often known that negative economic, political, environmental or monetary conditions contribute to the rise in the spot price of gold.
In technical terms, the spot price is effectively an average net present value of the estimated future price of gold, based on the futures contracts traded and on the nearest month, called the first month. Many people consult gold spot price charts to identify market trends or to determine best buying and selling practices. If your gold assets are an important part of your future, whether it's your retirement fund or simply an investment to protect yourself from economic uncertainty, it's important to know if this is a good time to increase that investment while the spot price is falling, as the value of gold could increase even more in the future. 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.
Spot gold trading allows you to diversify your portfolio to protect against inflation and market volatility.