A Brief Explanation of the Spot Gold Price, and How It’s Calculated

The spot gold price is an indicative market price for unallocated or ‘benchmark’ gold. It represents the price of unallocated, good-faith gold that can be delivered on demand (on the spot) and is a standard unit of trade for measuring the cost of physical gold. In other words, it’s the base cost for buying and selling gold bars as an investment. When you hear that the current spot gold price has risen or fallen by $10, $20, $50 or another value, what you’re hearing is how much money you would have to spend today to buy a specific quantity of gold bullion. The spot market is where participants in the market agree to buy or sell goods at a pre-determined price on a specific date in the future – in this case, tomorrow. The main advantage of spot pricing is that it enables producers and consumers to lock in costs when prices are favorable rather than risk prices moving further in unfavorable directions.

What Determines the Spot Gold Price?

The spot gold price is determined by the supply and demand for physical gold bullion. When demand for the metal is higher than the available supply, the price goes up. When the supply exceeds demand, the price generally goes down. As with all commodities, other factors such as geopolitical uncertainty, interest rates and inflation may also affect gold’s price. The most important determinants of the spot gold price are the level of gold futures contracts being traded on the various commodity exchanges around the world. These futures contracts, which are standardized financial instruments that trade on exchange-traded commodity markets, are used by gold investors to bet on the future movement of the spot gold price. The higher the level of futures activity, the more investors are betting that the price will increase, and vice versa. Thus, futures contracts are major indicators of the level of demand for and supply of physical gold bullion.

How Is the Spot Gold Price Calculated?

The spot gold price is calculated using the gold price calculator via current spot price, the specified quantity of gold, the gold purity, the local spot delivery rate and the exchange rate for the U.S. dollar. For example, imagine that you’re in Australia and you want to buy 1 kilogram of gold that’s 99.5% pure. The current spot gold price for 1 kilogram of 99.5% purity gold with a local spot delivery rate of 0.126% would be $1,351.84 USD. The spot gold price for 1 kilogram of 99.5% purity gold at a spot price of $1,351.84 USD is $1,351.84/ 0.9954 = $1,344.89. The exchange rate is based on the current exchange rate for the U.S. dollar against the Australian dollar. You can find real-time spot gold prices on online sites such as the London Bullion Market Association’s LBMA Gold Price.

Spot Gold Price History

– 1971: The first gold futures contract is introduced by the UK Commodities Exchange (COMEX). The first gold futures contract is for 100 ounces of gold, with a maturity of 40 days. – 1980: Gold futures trading expands with the introduction of the Chicago Board of Trade (CBOT) futures contract. This contract differs from the COMEX contract in that it trades in 30-ounce lots and has a maturity of one year. – 2001: A new futures contract is launched on the UK Mercantile Exchange (NYMEX). This contract also trades in 30-ounce lots and has a one-year maturity. – 2006: The London Bullion Market Association (LBMA) launches its own gold futures contract, trading in 10-ounce gold lots with a maturity of one year.

How to Calculate the Current Spot Gold Price?

As discussed above, the current spot gold price is the price at which you can buy gold coins that is 99.5% pure, if you choose to buy the metal from a dealer rather than through futures contracts. If you want to know how much the spot gold price would cost at the current spot gold price, simply plug in the relevant figures into the above formula. For example, if you want to know how much 1 kilogram of gold that is 99.5% pure gold would cost at a spot gold price of $1,350, use the following formula: $1,350/ 0.9954 = $1,350 / 0.995 = $1,339.43.

The Future of the Commodity Markets and the Spot Gold Price

The future of the commodity markets is often uncertain, but a few things can be safely predicted. In general, gold prices will increase as inflation rises, and vice versa. As interest rates rise, the demand for gold will usually fall since the metal is negatively correlated with interest rates. Therefore, gold prices are likely to fall when interest rates are high. The spot gold price will also change in response to supply and demand factors. Since gold is a finite resource, the supply of gold is limited. As new gold is mined, old gold is depleted, so supply and demand are inversely related. In general, demand for gold will increase as the world economy grows, particularly in Asia and UK, where gold is often used as a form of investment and savings.

Wrapping up: Should You Buy Physical Metal or a Contract?

When you buy physical gold bullion, you own the underlying asset — that is, the gold itself. When you buy a gold futures contract, you’re making a bet that the price of gold will be higher when the contract matures. Advantages of physical gold bullion: The main advantage of buying physical gold bullion is that you own the actual gold. This means you can sell the gold at any time, and you can also store it yourself in a secure location. Advantages of gold futures contracts: When you buy a gold futures contract, you don’t have to worry about storing the gold or selling it. You can also buy a small position in gold that might not be appropriate if you buy physical gold bullion. Disadvantages of physical gold bullion: The main disadvantage of buying physical gold bullion is that it’s expensive to store and insure. Disadvantages of gold futures contracts: When you buy a gold futures contract, you don’t actually own any gold. You also run the risk that an upward price movement in the gold market could lead to losses, whereas gold bought as physical bullion will always increase in value over time.