Spot Gold Price
Generally, the spot price is an immediate price with settlement in two business days.
However, because thefutures market is fast to react to new information and quickly incorporates it into gold prices, the spot gold price is actually derived from futures prices (it is a bit counterintuitive, since futures prices are, in theory, determined using the commodity’s spot price, the risk free rate, time to maturity of the contract and other factors, such as costs associated with storage or a convenience premium). In practice the spot gold price is determined by the most recent month’s futures contract with the most volume. Technically, the spot gold price is the net present value of the futures price for the nearest month contract.
The spot gold price should not be thus confused with the price of physical bullion quoted by bullion dealers or with the, as some investors think. The LBMA Gold Price is a snapshot of gold prices quoted by traders in the London OTC spot market for wholesale transactions, while the price offered by bullion dealers is the market price of physical bullion in retail trade.
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