When trading gold bullion, the price is usually governed by the “Spot Gold Price“. This is the explicit value at which an ounce of gold is selling for on the “over the counter” market at any given point in time.
Just like shares, the gold spot price changes minute-to-minute, hour-to-hour as supply and demand fluctuate. The gold spot price, also known as the “gold current price” can be affected by other influences, such as economic uncertainty, war or any other factor which encourages investors to convert their funds into physical commodities.
Smaller investors can use the gold spot price as a guide to plan their own bullion purchases, or to monitor the value of their own holdings. Using this information, investors can decide whether to purchase bullion, or if a certain threshold is reached, to sell some of their reserves. However, investors need to be aware that the gold spot price does not take into account broker fees, gold storage costs, insurance or any other additional sums attached to gold trading.
Smaller investors are unlikely to be able to trade directly on spot markets, because units are traded in very high value denominations. Often spot markets have a minimum transaction value of as much as $500,000, keeping individual investors out of the market.
The gold spot price is different from gold future prices or the gold fixing price, which are used by professional traders or large financial institutions to conduct high volume bullion trades.
Written by Mark O’Byrne and published by 24h GOLD ~ July 24, 2013.
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