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Understanding the core of Spot Gold Price and Future Gold Price

understanding spot future gold price
With the prices rising high at an exponential trend and burning a hole in our pockets, Gold is certainly not considered as an easily accessible commodity. In the arena of gold trading, two terms which are being widely used are spot and futures gold. Thus, knowing what they actually imply is the elemental step en route to gold trading.

Here is a brief overview of these two key points which, would certainly help you understand the minute subtleties of gold trading.

Spot Gold: It refers to the genre of gold trading where gold is purchased on the spot i.e, on an immediate basis. The price is being fixed on an instant note with the cash and product being interchanged instantly.

Futures Gold: It refers to the genre of gold trading where the transaction takes place on a fixed date. But delivery of the product will be done in the near future at a mutually agreed date. To be more precise, it means you need to pay for the product now but, the delivery will be made in the near future.

The value of spot gold fluctuates rapidly as per the market changes which, significantly depends on a myriad of factors such as global trends, demand and supply, currency changes and many more. Spot gold is noted to be comparatively cheaper than futures gold price as there is no speculation or anticipation involved during the time of its purchase. Thus, it offers a clear view of the expected gains to the investors without making any sort of market predictions. On the contrary, the prices for futures gold are costlier, while considering the storage charges till the delivery date and other extra expenses incurred by the supplier.

Here is a quick rundown on the basic points of distinction between Spot Gold and Futures Gold.

Parameter Spot Gold Futures Gold
Price Current Price. Price is adjusted with respect to storage and delivery, thereby making it high-priced.
Delivery Immediate Basis. Delivery at an agreed date, generally after 2-3 months.
Price Settlement Immediately at the point of trade. Settlement takes place within a day or two after the contract is being signed.
Risks involved Low risk, offering assured gains. Moderate risk, where the gold price at the time of delivery might rise or decline, thereby leading to the profit or loss scenario.
State of Liquidity High liquidity. Restricted liquidity, considering the delay in delivery of gold.

Apprehending the entire concept of trading on gold markets might seem almost like a Byzantine task a novice. However, noticing these crucial areas of differences will certainly help in laying the foundation of market analysis before making it an integral part of his investment portfolio.
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