Gold and silver are prized for their security, stability, and intrinsic value. These precious metals are considered safe-haven assets and are a terrific way to diversify your retirement portfolio. If you’re looking to invest in gold, silver, or other precious metals, you need to understand spot prices. They are valuable indicators of gold and silver’s current market value for professional investors and those looking to protect their retirement.
Noble Gold Investments has over 20 years of expertise dealing with precious metal transactions. We provide crucial security and in-depth information for our clients who are close to retirement. Our goal is to create a safe and straightforward way to buy gold and silver for portfolio diversification. In this guide, we discuss spot prices, how they’re calculated, and their significance to the global market and investors.
A Brief Overview of Spot Prices
Professional bullion dealers buy and sell gold on the spot market. This distributed market is composed of global participants who share a set of common standards. These rules deal with assumptions about trading gold, such as:
- The buyer is buying at full price within 48 hours for immediate delivery.
- The price is quoted per troy ounce in United States Dollars (USD).
- At the point of trade, the gold will be unallocated. However, you have the right to allocate without cost in London.
- The delivered bars will be whole 400 oz bars manufactured by refiners on a list maintained by the London Bullion Market Association (LBMA).
- The buyer will pay for a recognized specialist buyer’s courier to pick up the gold bullion bars at the seller’s vault.
These assumptions make the gold trading process easier for the buyer and seller, and they also rely on the spot price of gold and silver. If you’re going to buy, sell, or trade gold cold, you use the spot price or the live gold price. Spot prices represent real-time values and rely on the seller’s ability to deliver the material immediately.
How is the Spot Price Calculated?
Investors trade, buy, and sell gold and silver on a virtual market akin to the stock market. The primary markets for trading gold and silver are the New York Mercantile Exchange (NYMEX), a division of the NYMEX known as the Commodities Exchange (COMEX), and the LBMA.
Like stock prices, spot prices are dynamic and constantly change. Several factors contribute to this price fluctuation, including:
- Demand: Spot prices tend to rise when there is a high market demand. The reverse is also true—when there is less demand, the price of gold and silver falls.
- The economy: Economic indicators like interest rates, fiat currency values, and inflation are significant when calculating spot prices. Investors view gold as a hedge against currency depreciation and inflation. When the U.S. dollar weakens, gold prices tend to increase.
- Political events: Geopolitical tension, conflicts, and instability increase the demand for safe-haven assets such as precious metals. Investors usually shift their assets around, pivoting towards the stability of gold and silver.
- Trading activity: Future trade speculation also affects spot prices. If investors are predicting large buy or sell orders, prices may move significantly.
- Global supply: Gold is finite, but it is usually in high demand. Many industries, such as technology, dentistry, and jewelry, utilize gold. The amount of gold and silver available from mining, recycling, and central banks impacts spot prices. When supply is low, prices increase.
Why Spot Prices Are Important
If you’re looking to invest in gold bars or silver, you must understand spot prices. While exchange rates rise and fall, there are current trends for silver and gold you should be aware of. These trends affect their market price, making them significant for traders and investors.
Spot prices offer valuable insights into current market sentiments. By analyzing trends and price movements, you can see how global economic conditions are affecting market dynamics, such as supply and demand.
With these insights, you can make informed decisions. Tracking historical price trends enables you to identify the right time to buy or sell, which helps you get the most value for your investment. Additionally, this in-depth knowledge helps you mitigate your overall risk by limiting your exposure and ensuring you receive a fair price.
You can use spot prices to set stop-loss orders, allowing you to automatically sell your gold coins or silver when the spot price hits a specific point. Investors use spot prices as a benchmark to determine the value of silver and gold. Whether you’re purchasing exchange-traded funds (ETFs), coins, or bars, you can use spot prices as a reference to
Futures Prices
An agreement between a seller and buyer to purchase or sell gold or silver later is known as a futures contract. This contract allows you to purchase gold at a specified future date at the current market price. Spot prices rise and fall due to external and internal factors. While this change is normal, it does create a certain amount of risk for precious metals investors.
For example, say the current price is $3,000 per troy ounce of gold, and you have a budget of $12,000 next month to buy gold. That means, with today’s spot price, you can afford to buy four ounces of gold. With a gold futures contract, you lock in today’s spot price of gold when you buy next month, even if the price of gold increases.
A futures contract is a risk for sellers because they may lose money if the price of gold increases. However, futures contracts also protect sellers against loss because gold prices can also decrease. By tracking and understanding spot prices and trends, sellers can lock up sales at the current price.
How Gold Measurements Affect the Spot Price
Gold and other precious metals have a standard unit of measurement called the troy ounce (t oz). Unlike the standard ounce that measures flour or sugar, the troy ounce was developed specifically to measure precious metals and became the official standard for gold and silver in 1527.
A troy ounce is 31.103 grams, making it heavier than a standard ounce at 28.35 grams. In some countries, kilos and grams are used to measure the weight of gold, which can affect the spot price. Luckily, these metric weights are easy to convert to troy ounces. By standardizing the weight of gold, a troy ounce is the same as a troy ounce everywhere across the globe. Therefore, spot prices will be equivalent, regardless of the currency or your location.
Why Can’t I Buy Gold at Spot Price?
You may be wondering why the price you pay for gold is more than the spot price. This is because the spot price of gold and other precious metals is the unrefined, unmined price of the metal when it’s still in the ground. As with other goods, there is a cost to “manufacturing” gold. That is, mining, refining it, and forming it into rounds, bars, coins, or bullion. Dealers place premiums on precious metals, or markups, to cover the cost of production, storing, shipping, and overhead.
Additionally, when demand increases or supply decreases, the actual price of precious metals increases. Other factors that influence how much you, as an investor, pay for gold include:
- Denomination: Smaller denominations have higher production costs, which raises the price of the final product.
- Product type: Bars are cheaper and easier to produce than minted bullion and certified coins. If the spot price of silver is $30 an ounce, the premium for a silver bar may be $32, while the premium for a Silver Eagle Coin may be $40.
The spot price is just the base price of the raw metal. You’re buying the finished, certified, delivered product. When you buy precious metals, you pay the premiums for transforming raw material into a tradable asset, which can help you diversify your portfolio and protect your wealth.
How Spot Prices Impact Retirement Investors
Spot prices serve as an anchor for everyone in the precious metal’s supply chain. Miners excavate the raw ore and sell it to refiners at slightly below the spot price. The refiners then purify the metals, turning them into fine-quality bullion. The bullion is then sold to mints for slightly above the spot price.
Mints then create gold products, such as coins, rounds, and bars, for the public and sell them to dealers like Noble Gold Investments for a price slightly more than they paid the refiners. Dealers price their products to compete strategically with other dealers and still make a profit.
When you buy gold, platinum, silver, or palladium, you are buying it for a little more than the spot price. However, you’re investing in a precious metal whose value will potentially appreciate over time. By investing in gold, its value will eventually exceed what you paid for it, which earns you money and secures your retirement.
Invest in a Precious-Metals Backed IRA with Noble Gold Investments
The price of gold changes constantly during an ordinary trading day, providing investors in the gold market with opportunities to profit or lose money. Sometimes, even the smallest news events can dramatically change the current spot price. These substantial swings can cause huge profits or losses for active traders and speculators.
However, investing in physical gold or bullion as a long-term retirement solution offers more stability. As the industrial demand for gold grows, the overall value of gold and its price will continue to trend upwards, even in times of economic volatility.
If you’re looking for ways to diversify your retirement portfolio and safeguard your long-term wealth, consider investing in a gold-backed IRA from Noble Gold Investments. We have over two decades of experience dealing with precious metals transactions. As coinage experts, we know how to ensure your wealth is preserved through various asset classes and wise investment decisions.
Our team is ready to answer any further questions you have about spot prices, futures prices, market trends, and the importance of investing as a hedge against economic uncertainty. Additionally, we offer a guaranteed buyback program. If you buy gold or silver coins from us, we’ll buy them back from you, no questions asked. To learn more about investing in gold bullion coins as a gateway to your future, contact us today.
