What does the spot price of gold mean?

Simply put, the spot price of gold is the real price of gold at any given time. It is the reference price at which an ounce of gold can be bought or sold at that time around the world. Since gold is one of the most actively traded commodities, the price is very dynamic and constantly changing. 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.

The spot price of gold represents the current purchase price of one troy ounce of the precious metal for immediate delivery. 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. This global scale means that the spot gold market is open somewhere in the world 23 hours a day, from Sunday to Friday. The spot price of gold is based on the price of one troy ounce of gold on international stock exchanges.

At the most basic level, the spot price of gold depends on the balance between supply and demand in the international market. If you look at the gold price charts for the past six months, you'll see that the spot price has risen and fallen with multiple peaks and troughs. The LBMA gold price is a snapshot of the gold prices quoted by London OTC spot market operators for wholesale transactions, while the price offered by bullion traders is the market price of physical ingots in retail trade. Nowadays, gold can be traded in physical form, such as gold bars, coins and ingots, as well as through paper transactions, such as gold futures, exchange-traded funds and gold stocks.

Paper gold: an asset that reflects the price of gold without actually being gold in and of itself; it is not backed by real metal, so it is considered to be only on paper. There have been times when, due to changes in the value of one currency, the price of gold in another currency may rise or fall more than the price of the US dollar or even move in the opposite direction. Technically, the spot price of gold is the net present value of the futures price of the nearest month's contract. Gold is more “money” than a commodity, but since it has an industrial and jewelry use, the price can be affected by the performance of raw materials in general.

While in the spot market, purchased gold is intended for immediate delivery, in the futures market gold is sold under a contract with a future delivery date at a predetermined price. In practice, the spot price of gold is determined by the most recent month's highest-volume futures contract. The party that agrees to buy the underlying asset is said to have a long position and expects the price to rise, and the party that agrees to sell the asset is short and believes that the price will fall. However, if we analyze the gold futures contract chain, we will see that the August gold futures contract is trading at the same price.