Gold spot price or simply "spot price", is a precious metal industry phrase that is central to all business transactions.
This article addresses:
- What gold spot rate means;
- How the market assesses spot price;
- Its application; and
- Dangers to be on the lookout for when making purchases.
Before we begin this venture, a little foundation must be set forth.
Gold as a Safe Haven Asset
Acquiring Gold provides a means for all people to safeguard their wealth against dollar devaluations and volatile stock markets. Gold is available as a tier one asset in the form of physical bullion and in paper certificates. Physical Gold must first be mined and then processed into bullion. The Gold bullion is then minted by various entities worldwide, both government and private. The mints then form coins, bars, and rounds, into a wide range of sizes. You can read more in our other article discussing history and science of bullion.
An alternative to owning physical Gold, is Gold certificates. Unlike Gold bullion, those who buy Gold certificates don’t physically possess the Gold, thus precluded from storing it themselves. Compared to owners of physical Gold bullion, some investors prefer the relatively light weight of paper and its tangible aspects. Perceiving it as convenient and easy to exchange paper for paper Gold certificates.
*Safe Haven Metal only offers Physical Precious Metals for purchase, we do not deal in paper.
The Standard Base Weights for Spot Price
The standard unit of measurement is the troy ounce. When we shop in the U.S. we are used to the avoirdupois ounce (suddenly it's clear why we just call it an ounce). A troy ounce is slightly heavier, equivalent to 31.103 grams or 1.097 avoirdupois ounces. Read more in our troy ounce article.
What is Gold Spot Price?
The Gold Spot Price refers to the current market value at which one troy ounce of raw Gold can be bought or sold for immediate delivery on the Precious Metals market.
Global market conditions constantly fluctuate causing changes in the value of Gold per troy ounce. Thus influencing buying and selling activities. It is prudent to closely monitor daily price changes and performance indicators. But also to view these changes relative to the week and month. See our charts to visually observe trends in the spot value of gold. Like everything, we can never know the future of gold spot rates. But we can predict human behavior by staying informed about world market news and market reports. Allowing for informative decisions about the Precious Metals market.
Comparative Fluctuations
These fluctuations in spot price are relatively small increments. For example, a large swing in a single gold day would be around $40 about 2% of spot. Whereas a 2% swing in Southern California lower middle class real estate is $16,000.
Understanding the Price of Gold Charts
Safe Haven Metal provides investors with a user-friendly live gold and precious metals Spot Price ticker and charts. The page is continuously updated to reflect the latest world prices. The charts also allow users to see recent market trends, as mentioned above.
Gold Commodity Contracts
Gold futures contracts, also known as commodities, play a significant role in determining the Gold price per troy ounce. Commodities encompass nearly all raw goods, including Gold, Silver, Platinum, crude oil, cocoa, coffee, soybeans, cotton, etc. Each with futures contracts traded on various global exchanges. Gold futures contracts offer commodity producers, end-users, and speculators opportunities to manage price risk, buy and take future delivery of real-world goods, or speculate on Gold spot rate movements. However, debates persist about true price discovery for Gold bullion in today’s market due to the high volume of paper contracts compared to actual physical Gold delivery.
Is the Spot Value of Gold Per Ounce Constantly Changing?
Yes, the spot value of Gold per troy ounce undergoes regular changes during world market hours. Updating from 6:00 PM EST every Sunday through 5:15 PM EST Friday. While Gold may experience periods of consistent prices, it can also change rapidly due to various global influences. Such influences include currency inflations, political events, supply and demand fluctuations, and other world events.
Why Can’t I Buy Gold at the Spot Price?
This is where the theoretical reality of spot price is exposed. When everyone purchases Gold, the actual cost may exceed the spot value of Gold per ounce. This is due to bid/ask prices and additional premiums associated with the production and distribution of Gold.
Bidding Price
– The bidding price represents the price at which a dealer is willing to buy Gold.
Asking Price
–The asking price is the price at which the dealer sells the same ounce of Gold.
Spread
– The spread is the difference between the bidding and asking prices. For example, if a dealer buys an ounce of Gold at $1,950.00 USD and sells it the same day at $2,190.00 USD, the spread is $240.00 USD.
Typically speaking, the higher up the chain one is to the gold refinery, the volume of purchasing becomes immense; thus, lowering the spread for the transaction. If the purchase order is 5 million ounces, then a $2 spread would profit $10,000,000. Which is more of a sting than $240, but also that was a $10 billion dollar transaction.
Premium
– The premium over spot price includes additional costs. This relates to the production and distribution of Gold, encompassing any overhead expenses generated during the Gold transaction. For example, big celebrity endorsements translate to larger premiums. Whatever they said about that company… you paid for.
Here's how the Gold supply chain works to establish spot price:
The process of purchasing Physical Gold for personal asset protection involves various players in the open Gold market.
Futures traders engage in leveraged derivative bets on worldwide futures exchanges. But their action is based on their view of what will occur in a world apart.
Miners extract mixed ore from the ground and then sell it to bullion refiners. These miners typically price their goods close to the world’s Gold spot rate. Of course such gorgeous veins like those below are why miners are motivated to do the heavy duty part of the job.
Refiners receive the ore and proceed to melt and purify it into fine Gold bullion. This refined Gold is then sold to mints or bullion dealers at just about the spot price of Gold.
Private and government mints are responsible for striking bullion coins or pouring bullion bars. These mints sell their products to Gold dealers at bidding prices, which are typically just above the spot value of Gold.
Retailers like Safe Haven Metal
Then on to the retail bullion dealers, such as Safe Haven Metal. We offer Gold bullion products to the public in a fair and transparent way. We price our products competitively to the current gold spot rate and include any premiums in the final price offered to our clients in our contracts. Letting you know the bullion and price at the time of sale.
We encourage everyone to shop around, and when doing so, ask them to put their premiums and inventory list on the same contact in advance of your signature. All you will receive in return for that modest commitment is hours of explanation why they can't do that. Yet we do it daily, and we won't do it any other way. Full transparency.
Gold Spot Price in Review
In summary, the Gold spot price is a result of the interaction between worldwide futures markets and the underlying real-world Gold price per ounce. The market for physical Gold, including the bullion items are available for purchase at Safe Haven Metal. We closely track the Gold spot price, with Gold bullion product prices typically hovering just above the spot price. This ensures transparency for our clients.
We hope this explanation helps you understand how the spot value of Gold is determined. While the process may seem complex, it is essential. But with at least a basic understanding of this significant aspect of buying Gold. You are able to better visualize the process involved and make informative decisions.
From the ground, to the refinery, to magic:
