Disclosure: Our content does not constitute financial advice. Speak to your financial advisor. We may earn money from companies reviewed. Learn more
Last Updated on: 22nd January 2024, 11:13 pm
Any savvy precious metal investor following the market closely is going to want to know the spot price of gold regularly.
We're often asked, “What is the gold spot price?” At the time of writing, on January 23, 2024, the spot price of gold is $2,020.75 per troy ounce. But this figure will inevitably change since spot prices are determined by up-to-the-minute changes on global commodities exchanges. By the time you're reading this, the price of gold will certainly have moved from this exact figure.
If you want to know what is the gold spot price, it can be easily discovered by navigating to our live gold spot price chart that tracks the most recent exchange data.
However, what most investors probably don't know is that determining the spot price of gold itself is a complicated matter. It's not like all the gold in the world is located in Fort Knox, and it's very rare for investors to trade gold bars or gold quarters and coins with one another.
Today, markets move at lightning speed. The precious metals market is hosted on electronic exchanges where the majority of gold trades are fulfilled on computers and no physical gold changes hands. This makes for a complicated pricing system that's subject to enormous amounts of change every day. This post aims to explain this gold pricing mechanism as simply as possible.
Table of Contents
How Markets Determine the Gold Spot Price
There are two core concepts at the heart of gold pricing: Gold proxies and derivative leverage. Those terms don’t exactly roll off of the tongue. But they are the mechanisms that drive the spot price of gold. Derivatives contracts (or futures contracts) are contracts that represent the price of an asset or commodity. Many commodities are traded using this mechanism, not just precious metals. Soybeans, wheat, coffee, silver, cotton, oil, and many other commodities are traded using such contracts.
These contracts are traded on various exchanges in futures markets. For a great introduction to the topic, just out our beginner's guide to gold futures trading. The acronyms of commodity derivatives exchanges are not as immediately familiar to the average investor since the average investor is usually just focused on stocks, bonds, mutual funds, or real estate, but the acronyms may sound familiar. Popular futures exchanges include CBOT, COMEX, NYMEX, and CME Group among many others.
At the end of the day no matter how they are traded, futures contracts exist to provide investors, producers of commodities (aka farmers and agribusiness companies), and end-users of commodities a way to manage risk and reward, buying commodities and goods, or simply a way to bet on the price to go up or down.
A futures price for any commodity is based on the price discovery contracts for the future delivery of a specific commodity.
The spot price of gold is taken from the forward month’s futures contract. Not just any contract though. The contract with the highest price. The contract can represent the current month or it can represent the price two or three months into the future.
Gold’s spot price is traded 24 hours a day but does not trade on weekends the way foreign or digital currencies do. Trading gold in the international marketplace happens on exchanges in New York, Chicago, Hong Kong & mainland China, Zurich, and London.
The Most Important Gold Spot Price Exchanges
Of all markets determining the gold spot price across the world, the COMEX exchange in the United States, as well as markets in China, are the most influential. COMEX is by far the most influential futures trading market and therefore influences gold’s spot price the most.
In Asia, China’s Shanghai Gold Exchange is the most important trading market. The difference with the SGE is that its pricing is focused on the price of actual gold bullion, not a futures contract. It’s growing aggressively year over year as it has been for a long time now.
Trading 100 Ounces
When an individual investor wants to walk into a jewelry store, bank, or depository to buy gold, they’re likely thinking of buying in grams or ounces. If you're wondering, the gold price per gram is simply the per-ounce spot price divided by 28.3 (at the time of writing, that's about $60.56). They’re not likely to buy hundreds of ounces at a time of course, but public markets like COMEX and others do. Futures contracts are traded in increments of 100 ounces, and the key thing to note about that is that roughly nine out of 10 futures contracts on the COMEX don’t require physical gold at all.
This may be a weird concept to wrap one’s head around but in a world where markets move so quickly and the value of gold is so highly sought after, trading contracts that represent gold but don’t actually require the physical variety to trade hands is not only practical, but necessary for the betterment of the broader global economy.
It’s estimated that for every one pound of actual bullion gold that trades hands, 100s of futures contracts get swapped. (We're sometimes asked, “How much is a pound of gold worth?” It's merely the spot price multiplied by 16. Today, that's about $27,000 as of March 2021). That’s good for retail investors and even more advanced investors trading large volumes, but the downside of these kinds of digital trades is that it is difficult to pinpoint exactly how much bullion gold is worth. That’s especially true when a federal government decides to make a deal that affects the broader gold market. Like when China or Russia, two of the world’s biggest players in the gold market, buy or sell gold for example.
What Impacts the Gold Spot Price Fluctuations?
It’s not just the large-volume international deals that change the price of gold on a day-to-day, moment-by-moment basis. Many other factors drive the daily, short-term gold price trend, including the following catalysts.
The average retail investor in any given market is the most likely player in the game to be a speculator. Especially within the world of commodities, the temptation to make a lot of money fast drives many investors to make short-sighted moves or even get into day trading futures or options contracts related to commodities. A large number of investors playing the short game can have a noticeable impact on the gold spot price. That's why the gold bar price today won't match the price next week or next month—they're constantly subject to speculative investors.
Threats of Price Inflation or Deflation
This has to do with the broader economy. As many investors know, gold is seen as a great store of value during recessions or hard times. It’s every survivalist’s haven for when the world is supposed to end. But the reality is the world doesn’t have to end for investors and global citizens to want to hedge against potential unrest in their home countries or across the world.
Governments and major corporations most certainly possess a lot of power when it comes to controlling the inflation or deflation of an asset. While most investors think about the printing and manipulation of fiat currencies in this context (consider what’s happening in Venezuela right now), the reality is that almost any asset’s value can be inflated or deflated via state manipulation, unless it's a finite resource.
Gold is a good hedge against foreign currencies or the stock market, but no asset is completely safe from risk. That’s why risk and reward always go hand in hand with investing.
News and Current Events
A major terrorist attack, a plummeting stock market, a big change in political leadership; all of these things can impact not only the spot price of gold but the general sentiment of investors everywhere. During times of unrest, gold usually goes up in value, but there have been many times throughout history where the news of the day involved governments instituting and successfully executing large-scale gold confiscation programs.
If you want to join the 10.8% of Americans who own physical gold, now is the time. Destabilizing current events, such as the ongoing COVID-19 pandemic, have brought chaos to financial markets. In response, investors have flocked to hard assets such as real estate and precious metals to anchor their wealth in relatively stable stores of value. Given the unfolding public health situation, now might be the right time to increase your exposure to gold.
The Rise and Fall of Interest Rates
When banks increase the cost of borrowing money, investors pull money out of the market. When banks lower the cost of borrowing, investors pour money back into the market. National banks certainly have the power to sway market sentiment, and gold is just one asset class among a whole slew of investment types that are far from immune from interest rates.
Gold Spot Price Frequently Asked Questions (FAQs)
To get the per-pound price of gold, simply take the per-ounce spot price and multiply it by 16, since there are 16 ounces in a pound. As of mid-March 2021, this figure is around 27,000 USD.
You can find the per-ounce price of gold by dividing the per-pound cost by 16 or multiplying the per-gram cost by 28.3. As of mid-March 2021, the gold price per gram is hovering around 60 USD.
For most of the last decade, the spot price of gold has hovered in the $1,550 and $2,000 range. The exact spot price is determined by a confluence of macro and microeconomic factors outlined above.
There are a variety of trusted online vendors for real, physical gold bullion. For a quick look at the best options on the market, here's our list of IRA-approved gold.
Yes, real physical gold bullion can be included in a self-directed IRA or 401(k) under some conditions. For instance, it must be held by a licensed, IRS-approved third-party custodian and cannot be deemed a "collectible item" under the Internal Revenue Code. For more information about gold's eligibility in tax-advantaged retirement accounts, check out our list of precious metals allowed in IRAs.
The spot price of a commodity represents the going rate for a particular quantity in present-value terms. In other words, it's the price at which you can buy or sell the asset in real time. This is contrasted with futures, which refer to prices for commodities with delivery dates in the future.
Other Factors in Determining Gold Spot Price
The supply and demand of gold available between governments and central banks also affect the price. That’s because large institutions tend to trade larger volumes. Believe it or not, changing values of both fiat currency and digital currency can affect the price of gold too. At the end of the day, fiat and digital currencies can only communicate value based on some sort of fundamental worth or underlying asset, so they all fluctuate together in some form or fashion.
If you feel like now's the right time to get started with precious metals investing, consider checking our list of the top-rated gold IRA companies on the market.
Photo courtesy of PixaBay.