You’ve likely heard the phrase ‘gold spot price’ several times before and, if you’re an investor, you’ll be familiar with live price charts that show the current price of gold following any fluctuations in the market. But do you really understand the gold spot price and what it means for you?
What exactly is the gold spot price?
The gold spot price is quoted per troy ounce of the precious metal. You can view the live gold price charts on the UK Bullion site to see what the current gold spot price is today.
The spot gold price is essentially the live price of gold at any given moment. It’s the price you can expect to pay or receive if you buy or sell gold right now – plus or minus any additional packaging, delivery or trading costs.
Unlike gold futures, the spot price relates to today’s price. Futures take a different approach, allowing traders to agree on a sale and a price now, but withhold from making an exchange until a fixed date in the future.
Gold futures allow traders to make bigger investments and take greater risks – ideally for greater profit, but of course there is always the chance of greater losses too. During the time between the initial transaction and the settlement date, a lot of traders will keep trading to either sell everything they’ve bought or buy back everything they’ve sold. Then, when it comes to the settlement date, they only have to consider their gains and losses.
Over-the-counter (OTC) transactions are another way of trading gold which involve traders dealing one-on-one to make an independent trade. An example of this type of transaction could be you buying gold bullion coins from the UK Bullion website.
Unlike gold futures, OTC transactions are private – the amount dealt and the price agreed isn’t made public. Most dealers will use the gold spot price to help them determine what to charge for bullion bars or coins. This spot price will come from a data provider where prices from the major banks are published and regularly updated.
It’s worth remembering that futures and the gold spot price are related to each other and it is often the present or nearest future prices which are quoted as the spot price of physical gold.