WHAT IS SPOT GOLD & HOW IS SPOT PRICE DETERMINED?

If you’re interested in the gold market, you may have seen the phrase ‘spot gold’ – but what is spot gold? Today we’ll explain what spot gold means, how spot price is determined, and why it is all very relevant to you if you’re considering adding gold investments to your portfolio. 

WHAT IS SPOT GOLD?

Simply put, spot gold is the value of gold right at this moment, and the spot price is exactly what it sounds like: the price that gold can be bought and sold right now, as opposed to some other later date and time in the future. Anywhere you go on our website, you’ll see the scrolling bar across the top of the page; these are real-time spot gold prices, as well as the spot prices of other precious metals. 

Spot price is constantly changing; this is affected by a variety of factors. Many people consult spot price gold charts to identify trends in the market, or to determine best practices for buying and selling. Many different types of charts exist, from weekly and monthly (these appeal to long-term investors) to hourly and even as granular as 5-minute charts (beloved by short-term investors). 

Spot price is typically stated in gold per ounce, gram, or kilo, although the most common format is price per ounce in U.S. dollars. 

HOW IS SPOT PRICE DETERMINED?

While gold investment is a major driver of the gold market, gold is also purchased for other reasons such as use in as the technology and medical industries as well as the creation of jewelry. Spot price of gold has many influencing factors, but the most crucial ones include:

GEOPOLITICAL REASONS

Geopolitical reasons are a major factor because people tend to invest in gold during uncertain economic times. Negative economic, political, environmental, or monetary conditions are often known to contribute to the rising spot price of gold. (After all, this is why gold is known as one of the “crisis commodities”.) Whether you’ve invested in gold bars or any other form of gold, a weakened economic state will increase the spot price and add value to your investment. 

STOCK AND BOND MARKET TURMOIL

The stock market can have a major effect on spot prices particularly during a bear market. If the stock market is falling and investors are feeling less confident in their accounts, there may be a trend toward increased sales of gold, which always affects the spot price.

FLUCTUATING CURRENCIES

As we mentioned earlier, even though gold is traded internationally, the spot price tends to be reflected in U.S. dollars. As such, if the dollar goes up, gold becomes more expensive for those buying it abroad. This may potentially cause the spot price to go down. But if the U.S. dollar is weaker, foreign investors are more likely to purchase, causing the spot price to go back up.

Other major factors that can affect what is spot gold price include:

• Equity markets
• Demand for jewelry 
• Inflation or deflation
• Interest rates
• High oil and gas prices

Gold’s spot price is an important factor in determining whether to buy or sell your current investments. If your gold assets are an important part of your future, whether that is your retirement fund or simply an investment to hedge against economic uncertainty, it’s important to know whether it’s a good time to add to that investment while spot price is down, knowing that the value of gold may later increase even more. If you have any questions about what is spot gold, current spot prices, and making your own investments in gold, our experts are always on standby to help!