Spot Gold Price: Things You Should Know

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Last Updated on: 14th April 2021, 08:35 pm

Spot prices of any currency, security, or commodity including gold, are continuously changing. They are used to determine futures contracts and are connected to them. In this article, experts discuss things you should know about spot gold prices.

Spot Gold Price Can Be Manipulated By Traders And Futures Contracts Brokerage Houses

“Spot Gold Price refers to the price of gold at a particular time. It refers to the price at which an ounce of gold can be sold and delivered on the spot. The spot price of gold is different from the futures and forward contracts that use the price of gold at a particular time in the future. And there are host of factors that play a key role in determining the spot price of gold. These include not just the forces of demand and supply but also the price of futures and contracts. Ideally, Spot gold price will assume the price of futures contract in the nearest month with the most volumes. This can be the future for next month, or two months after that.

For example, today – August 19, 2019, the spot price of gold stands at $1,498.80. The futures contract for Gold in August are trading at around the same price and so is the price of October and even December. Of the three months, however, December has the highest trade volumes. The current spot price of gold can thus be said to be used the December futures contracts as a benchmark.

Spot Gold Price can be manipulated by different traders and futures contracts brokerage houses by way of rigging quotes, and prices and trade volumes.”

Edith Muthoni, Chief Editor, Leanbonds.com

Gold Price Is Affected By Three Factors

“The fluctuating market price of gold that is to be delivered immediately after purchase is called the Spot Price of gold. To get the gold spot price you can average the net value of all currently traded gold futures contracts for the nearest month. In a normal market, gold futures prices are much higher than the spot price of gold. However, in times of extraordinary demand for physical gold, the spot price can be higher than the futures price.

Gold price is affected majorly by three factors- Supply and Demand, Market conditions and currency depreciation.

Many investors believe that gold price is manipulated. There are many variations of this theory, some say that precious metals are under the control of central bankers, while some blame big banks and their use of derivatives and high-frequency trading for the declines in the price of gold.

However, academic research did not find any clear evidence of gold price manipulation. The gold market is simply too big and too liquid for any person, central bank or corporation to control. Moreover, As we look at the long-term cycle of the behavior of gold prices we don't see a permanent downward trend (or even a flat line). Just like other asset classes, there are both bull markets and bear markets, when the price of gold goes up and down respectively.

Nitin Mathur, CEO, Tavaga

The Second Step Investors Must Take Is Know The Current Spot Price Of Gold

“To avoid paying too much when you buy or receiving too little when you sell, and to avoid potential scams, investors absolutely must know the credentials of the bullion dealer, not just what the dealer may tout on TV advertisements or with a fancy website.

If you don’t know gold, you’d better know your gold dealer.

The second step investors must take is to know the current spot price of the precious metal they want to buy or sell. Bullion items, such as the American Eagle, Canadian Maple Leaf, and South African Krugerrand usually sell for only about three to five percent above the current spot price depending on the quantity purchased. Beware of high-pressure selling prices that would force you to wait for gold or silver to double or triple in value before you could make a profit.

The third step is to take prompt delivery of the bullion items you purchase. Be wary of sellers who want to keep and store your gold, or claim it will take months to deliver items to you. The reason many people buy precious metal coins and ingots is because of their liquidity, but if you don’t have possession of the items then you can’t act quickly when you want to sell.

Barry Stuppler, Immediate Past President, Professional Numismatists Guild

The spot price of gold is an integral component for the buying and selling of the precious metal. Factor in what the experts have discussed in this article, and always remember to do your due diligence before investing your money.