Posts tagged 'invest in precious metals'

Gold nuggets on black background.

What is Spot Price?

August 6, 2010

The spot price is the price that is quoted for immediate payment and delivery of a commodity, a currency, or a security.

However “immediate” has a different meaning than in normal usage. Since these trades are generally—especially for commodities—dealing with large quantities of an item, instant delivery isn’t reasonable. Because of this, settlement usually happens with one or two business days of the trade. Forward price While spot price refers to the price agreed upon for immediate settlement, the forward price refers to the price for a forward or futures contract. In a trade with immediate settlement, payment and delivery happens within a couple business days of the trade. In a forward or futures contract, however, the contract is to pay and deliver the currency, security, or commodity at a price agreed upon today but at a future date. Market expectations With a non-perishable commodity like gold bullion, traders know that there will be as much gold today as there is tomorrow or in five months. The amount of gold in the world never changes, although demand does. This is what drives prices for gold and other precious metals higher or lower.