Learn About Spot Gold

"Spot gold" refers to the price of the precious metal gold in a specific kind of financial transaction dubbed a "spot transaction". With a spot transaction, the buyer and seller agree to buy or sell a commodity, currency, or security for settlement on the "spot date". Settlement is the completion of the transfer of cash or assets.

The "spot date" is set at the "horizon", or when the contract is initiated. The price that is used in the settlement of a spot transaction is called the "spot price", "spot rate", or "exchange rate". Essentially, spot gold is the buying or selling of gold in a cash market for immediate delivery of gold.

"Gold futures" is another financial product utilized for buying or selling gold. Futures are financial contracts where the buyer or seller has the obligation to purchase (or sell, if you're the seller) an underlying physical commodity or financial product. Although the underlying commodity is equivalent, spot gold and gold futures are traded truly differently.

The governing rules, trading hours, trading symbols, the types of contracts, and the contract sizes for gold futures are much different from spot gold. Spot gold is merchandised at over-the-counter (OTC) dealers such as found in the FOREX market. However, gold futures are traded in commodity exchanges globally where gold, silver, and other precious metals are traded. 

Universal price discovery for gold is done in the gold futures market. However, the largest gold market exists in London, and is known as the "The London Fix", "London fixing", or "gold fixing". The London Fix is a gathering that occurs via conference call twice a day by representatives of London's five largest bullion banks.

The current members of the London fix are: Barclays Bank, Deutsche Bank, HSBC Bank USA, ScotiaBank, and Societe Generale. The London fix happens daily in the morning at 10:30 am (the morning Fix), and once more at 3:00 pm (the afternoon fix). The banks fix the price of gold based on an aggregation of the buy or sell orders that the banks collectively hold for gold. Prior to World War I the world reserve currency was the British pound, and the price of gold was defined in pounds sterling. Now, the US dollar is the reserve currency of the world, and the price of gold is set in US dollars.

Gold is measured and sold by troy ounce. A troy ounce is based upon the British imperial system of weights and measurement, and weighs a little bit over a US ounce (avoirdupois). A troy ounce amounts to 1.0971428 oz. The London Fix buys and sells in 400 troy oz bars of gold. Gold is also bought and sold around the globe in smaller quantities like grams. Gold futures, conversely, are bought and sold in various sized lots, each having their own trading symbol to differentiate the lot sizes.

There are three general forms of physical gold that are bought and sold: bullion, bars and coins. Gold bullion is approximately 100% pure gold, and represents the large quantities of gold that are traded on the financial markets. Gold bars are smaller sized than gold bullion and are uniquely cast or minted in specific weights with varying numismatic values. Gold coins are minted of pure, and nearly pure, gold by various countries.

You can find spot gold on the London or NY markets, online, and at auctions. You must determine how you would like to buy gold. You may purchase and take delivery of the physical gold, arrange delivery to a vault where gold is to be stored on your behalf, or buy shares of a gold stock or an exchange traded product for gold. The main factors to factor in when buying gold are security and fees. It is best not to store gold in your personal safe.

Also be aware that gold de-values if you remove it from a permanent storage facility, because it will need to be re-evaluated by a gold specialist, which is a pricey procedure. Get full details of account types (allocated and unallocated), exchange traded products, and buying and storage information at www.spotgoldinfo.com

Sharon D. Richards has studied the financial markets for over 20 years. She is an expert when it comes to spot gold "Spot gold" is a acronym that is misunderstood by many. Learn all that you want to know concerning gold. Now, you can invest cheaper than you think. Visit http://www.spotgoldinfo.com for free (yes, really free) investment information.


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