Spot price is the current price (what you would pay “right now”) for a specific commodity, security or currency at a specific location in the marketplace. The spot price of gold and silver is typically quoted per ounce of the commodity (one ounce of gold, one ounce of silver, etc.) and can fluctuate based on supply and demand, as well as many other market factors.
Read on to learn what influences a spot price, elements that can impact the spot price and more.
Spot Price vs. Futures Price
While there are many unique features of spot prices and futures market prices, the primary difference between the two is time, which can have a dramatic impact on price. Spot price is the cost of immediate delivery of the product while the futures price is a contract for payment and delivery of a commodity at a pre-determined future date.
Because the futures pricing plays a role in determining the spot price, it’s important to make that distinction.
What Determines Spot Price?
There isn’t a simple answer to this question, as there are many factors that go into determining the spot price of gold, silver, and other precious metals.
However, gold and silver spot prices are mainly determined by commodity exchanges, including the “London fix” and the U.S. COMEX, where gold and silver are traded mostly through futures contracts. The spot price changes constantly as the markets move throughout the trading day.
What Impacts Spot Price?
Spot prices of precious metals are constantly in flux as many domestic and global market components influence the spot price of gold, silver and others, including:
- Economic data
- Inflation or deflation
- Geopolitical news and events
- Federal Reserve actions
- Equity markets
- Interest rates
When understanding spot prices for the precious metals of interest, it’s valuable to understand the interconnectivity of global markets that all play a role in impacting the day-to-day spot prices of precious metals.
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