Peek Into The Definition Of “Spot Gold”
“Spot gold” pertains to the price of the precious metal gold in a particular type of financial transaction called a “spot transaction”. With a spot transaction, the buyer and seller enter a contract to buy or sell a commodity, currency, or security for settlement on the “spot date”. Settlement is the finalization of the transfer of cash or assets. The “spot date” is defined at the “horizon”, or when the contract is initiated. The price that is utilised in the settlement of a spot transaction is termed the “spot price”, “spot rate”, or” rate of exchange “. In a nutshell , spot gold is the buying or selling of gold in a cash market place for immediate delivery of gold.
“Gold futures” is another financial mechanism used for buying or selling gold. Futures are financial deals where the purchaser or seller has the obligation to purchase (or sell, if you’re the seller) an underlying physical commodity or financial product. Though the base commodity (gold) is equivalent , spot gold and gold futures are bought and sold profoundly differently. The governing rules, trading hours, trading symbols, the kinds of contracts, and the contract sizes for gold futures are different from spot gold. Spot gold is merchandised at over-the-counter (OTC) dealers particularly found in the FOREX market. However , gold futures are traded in commodity exchanges all over the world where gold, silver, and other rare-earth elements are traded.
International price discovery for gold is done in the gold futures market. The largest gold market is in London and is known as the “The London Fix”, “London fixing”, or “gold fixing”. The London Fix is a business meeting that happens via conference call twice a day by members 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 occurs 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 altogether hold for gold. Preceding World War I the world reserve currency was the British pound, and the price of gold was set in pounds sterling. Today , the US dollar is the reserve currency of the world, and the price of gold is established in,determined in US dollars.
Gold is measured and sold by troy ounce (oz). A troy ounce is based on the British imperial system of weights and measurement, and weighs just a bit more than a US ounce (avoirdupois). A troy ounce is equivalent to 1.0971428 ounce . The London Fix deals in 400 troy ounce bars of gold. Gold is also traded around the world in smaller quantities like grams. Gold futures, conversely , are traded in different sized lots, each having their own trading symbol to differentiate the lot sizes.
There are three basic forms of physical gold that are traded : bullion, bars and coins. Gold bullion is nearly 100 % pure gold, and represents the large quantities of gold that are exchanged on the financial markets. Gold bars are smaller in size than gold bullion and are separately cast or minted in specific weights with various numismatic values. Gold coins are minted of pure, and very nearly pure, gold by different countries.
You can invest in spot gold on the London or NY markets, on line, and at auctions. You must determine how you would like to buy gold. You can acquire and take delivery of the physical gold, arrange delivery to a secure vault where gold is to be stored on your behalf, or purchase shares of a gold stock or an exchange traded product for gold. The biggest things to bear in mind when buying gold are security and fees. It is best not to hold gold in your personal vault. In addition, note that gold de-values if you move it from a permanent storage facility, because it will need to be re-appraised by a gold specialist, which is a pricy procedure. .