Spot gold is the price of gold that is available for immediate physical delivery to the buyer. It is actively traded around the world on a number of different exchanges. Gold is a global asset that is traded in U.S. dollars. In New York, professional bullion dealers buy and sell the precious metal on the Comex which is a well organized exchange for trading gold futures and gold options. The activity in the Comex actually determines the spot price of gold.
Gold Trades Virtually Around the Clock
While the Comex gold market closes at 1:30 pm in New York, gold futures continue to trade in other markets. In addition to the New York exchange, there are gold exchanges in London, Tokyo, Hong Kong, Zurich and Sydney. These markets are spread out across different time zones, so, while the market is closed in New York, gold may be trading in Hong Kong or Sydney.
Trading Gold on the Futures Market
Gold futures are traded in 100 Troy ounce contracts. Banks, hedge funds and other large institutions are the major players in the market. Traders buy gold for delivery at some point in the future. They normally do not take possession of the physical gold. If the spot gold price is higher than the price paid when the contract(s) were purchased, the buyer realizes a profit. Conversely, if the current price of gold is lower when the contract expires, the buyer will suffer a loss. Actually physical gold is not normally delivered. As the case might be, either the buyer or seller will settle in dollars for the difference in the initial and current gold price.
Individuals Who Wish to Purchase Gold
An individual can buy gold in several different ways. They can deal with a company that sells bullion and have the gold that they purchase kept with the company. They do not have physical possession, but rather, they get a regular statement showing the amount of gold they own and its value as of a given date. The advantage is that the gold is kept safe from theft or loss and the buyer does not have to pay delivery charges.
Gold is considered a commodity where one pure ounce of the precious metal bullion is interchangeable with any other one pure ounce. Gold can either be held in an allocated or an unallocated account. An allocated account assigns specific numbered bars of gold to the buyer. It is the private property of the owner. Banks or other custodians of the gold can not include that gold on their balance sheets as assets. They can not borrow against the value. They can charge a storage fee.
Unallocated gold, which represents the vast majority of stored gold becomes part of an inseparable mass of gold. A bank can sell some of their unallocated assets and only needs to pay the owner the same number of ounces of gold they have on deposit.
Most small gold investors purchase an ounce or maybe a 10 ounce gold bar and take possession of the gold. They can go to most coin stores or other authorized gold sellers and pay the spot gold price plus a small premium for the manufacturing and distribution costs. In addition, most dealers will add another few dollars per transaction as their fee for selling the precious metal. When you want to sell your gold, you should expect to get the spot price of gold at the time of the transaction.