Gold Spot Price (XAU)
Current Gold Price
It’s always important to find accurate updates on the price of gold per ounce on an up-to-the-moment basis. This is because the spot price of gold is changing every few seconds as the precious metal is traded. Current gold prices are typically measured in dollars per oz. Keep in mind that the gold price per ounce is expressed in troy ounces, not standard avoirdupois (AVP) ounces that are used in almost all other situations.
Find out more about the spot price of gold below!
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How Gold Prices are Determined Today
Some people are not familiar with the notion that precious metal spot prices prices are largely determined by trading on the futures market. Because gold is a precious commodity, this trading takes places on the COMEX, the commodities exchange run by the Chicago Mercantile Exchange (CME) Group through the New York Mercantile Exchange (NYMEX). As hedgers and speculators enter into futures contracts, the balance of long (buy) and short (sell) positions moves the price of these contracts. This is why you often hear the net-long or net-short position of futures in the financial news; this data is provided by the Commitment of Traders (COT) reports each week. The fluctuations of the price of gold futures contracts directly affects the spot price of gold that you see going up or down during the trading session.
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Precious Metal Terms
- Spot Price
- The current market price at a given time and place for a commodity. The two spot price types are the Ask and Bid price.
- Ask Price
- The minimum price that a dealer is willing to sell for one troy ounce of precious metal.
- Bid Price
- The maximum price that a dealer is willing to purchase for one troy ounce of precious metal.
- The value of a coin above its intrinsic value (value above the spot price).
- The difference between a dealer's Bid and Ask price.
- Melt Value
- The value of the metal content of a precious metal object, regardless of workmanship or rarity. The raw value of an object if it were melted down. Metal value is usually only calculated on the precious metal content of an item. For example, the melt value of a sterling silver coin only takes into account the 92.5% silver content of the coin, and ignores the 7.5% copper content.
The Nature and History of Gold Prices
In most cases, when someone is curious about the price of gold, what they are referring to is the gold spot price. The spot price of gold rises and falls throughout the trading day in response to activity in the futures markets. The commodities exchange (COMEX) is the platform where commodities like gold are traded. Because large financial institutions and official "Market Movers" can trade large quantities of gold through these futures contracts, this action is used as a gauge for gold demand--even though gold futures contracts rarely involve any actual exchange of physical precious metal and are instead treated as a financial instrument.
However, gold has been used as a store of wealth and as the fundamental conduit of value (i.e. money) for far longer than the trading of commodity futures has existed. In fact, the history of gold functioning as a form of money can be traced back far into ancient times. Although the global financial system is no longer underpinned by an official gold standard, the yellow metal has continued to be a crucial means for transferring wealth and providing investors with a safe haven, liquidity, diversification, and a hedge against inflation.
Beyond this dynamic, the gold price is also impacted by a variety of outside economic factors today. It is closely tied to the exchange rate of the U.S. dollar: when the dollar falls against it peer currencies, the price of gold usually rises in commensurate amounts, and vice versa. Because of its unique monetary properties, gold is by far the best objective measure of any currency's purchasing power--chief among them the dollar, the world’s de facto reserve currency.
Moreover, geopolitical tensions and consumer sentiment play a large role in determining the spot price of gold from day-to-day and minute-to-minute. If the markets are not confident in the direction that key macroeconomic trends are pointing, they typically will opt for the safe haven of holding gold, thus driving prices higher. Similarly, when there are tumultuous geopolitical tensions in the news, investors flee for the safety of gold as opposed to riskier assets.
What Is the Gold Spot Price?
The spot price of gold is a free-floating price that represents what price gold is trading for at any given moment. Spot prices are a benchmark for how much a wholesale purchase of physical gold will cost before any added markup or premium. This price is used by gold refiners, gold miners, financial institutions, and gold dealers to determine pricing for gold bullion. Financial instruments that are derived from gold, such as exchange-traded products, are also closely tied to the gold spot price.
Spot prices are used by traders, investors, producers, and precious metals dealers all around the world as a reference in order to settle transactions. Specifically, dealers base their buy (bid) and sell (ask) spreads on the prevailing spot price. Although different locales will see varying premia above the New York spot price depending upon the availability of gold bullion in the area and the relative level of demand, the concept of a spot is universally used as a benchmark for the gold trade, like all commodities.
The Use of Gold as Money
Going back thousands of years into antiquity, gold has served as money. As a matter of fact, it is often considered the ideal medium of exchange. Even before the time when coins or protocoins were first introduced (around the 7th century BCE), precious metals were a popular medium for transferring value between ancient cultures. This makes sense when one considers that civilizations around the world chose gold as their money throughout the vast majority of history. This was hardly an arbitrary decision on the part of our predecessors: There are actually a variety of special properties and qualities that uniquely make gold the perfect material to use as money.
Gold is the most malleable metal, meaning it is the easiest to work with metallurgically. This was not only convenient to past societies that had less sophisticated technology at their disposal, but also means that gold bars and gold coins are easy to strike with the imprint of the issuing authority. This is the concept that led to the innovation of government-issued money in the first place. Today, it helps gold refineries verify where their products originated from.
Gold is also portable, a scarce commodity, recognized all over the world, essentially indestructible (it doesn’t tarnish or rust), and has proven to be a reliable store of value over time. Perhaps most importantly, gold is fungible, meaning it can be accepted in transactions as money. This is even true today despite the disappearance of gold coins and any gold standard backing the value of our money.
Historical Gold Price
One of the most noteworthy things in the history of gold's use by humanity is the remarkable stability of its purchasing power over time. Gold has a tendency to resist inflation, playing the opposite role of currencies (which see their value erode due to inflation).
For instance, one ounce of gold was valued at between $18 and $20 with only a bit of fluctuation up and down over the century between 1833 and 1932. This was a period that saw relatively little inflation of the U.S. dollar. However, in the period of more than 100 years since the Federal Reserve was introduced in 1913, inflation has robbed the U.S. dollar of more than 95% of its value. By contrast, the amount of assets you could theoretically trade for one ounce of gold in 1913 is roughly the same today. The only thing that has changed is the higher number of dollars needed to represent these values.
An enduring measure used to determine whether gold or silver were overvalued or undervalued relative to one another is the gold-silver ratio. Some investors even use fluctuations in the ratio to change the allocation of the two precious metals in their portfolio. Interestingly, in the early years of the United States, the government undervalued gold relative to silver, choosing a ratio of 15.5:1 when most of the rest of the world was using a 16:1 standard. This meant that it was often difficult to keep gold circulating in the country: people could derive a profit merely by taking gold coins and selling them overseas!
Understanding The Gold Price
What is the spot price?
The spot price of gold is a free floating price that represents what price gold is trading for at any given moment. Spot prices are a benchmark for how much a wholesale purchase of physical gold will cost before any markups or premiums. This price is used by gold refiners, gold miners, financial institutions, and gold dealers to determine pricing for gold bullion. Financial instruments that are derived from gold, known as exchange traded products, are also closely tied to the gold spot price.
Gold Spot Price Frequently Asked Questions
How are spot prices calculated?
The total supply and demand for gold in the market determines the spot price. Thus, the movement of the gold spot price up or down reflects some change either in the supply of available gold or the current demand for gold. This includes (but is not limited to) factors such as output from gold mines, allocation for gold jewelry production, economic uncertainty, or other geopolitical events. Like most commodities, trading of gold futures has a significant influence on current spot prices, as well.
How often do spot prices change?
Spot prices for gold are constantly changing, as the price floats freely on the market and responds to real-time trading behavior. Although U.S. markets close at 5:15 pm in New York, gold continues to be traded “overnight” in Asian and Australian markets, so the spot price can change at virtually any time.
What can cause spot prices to change?
Any change or disruption to either the supply or demand for gold will change the spot price. For example, if several large gold deposits begin to dwindle, then the expected supply shortfall would likely increase the spot price because gold is more scarce. An increase in gold demand, perhaps due to accelerating inflation or extreme economic uncertainty, could also drive the spot price higher as more people are willing to buy gold. Supply and demand are affected on a daily basis, meaning the gold spot price is constantly in flux.
What amount of gold does the spot price refer to?
The spot price always refers to the going rate for one troy ounce of gold. Precious metal weights are traditionally denoted in troy ounces, a unit equivalent to 31.1 grams (or 480 grains).
Is the spot price universal?
Yes; although the relative scarcity of gold in certain locales, or the added costs of importing gold to those locales, can cause gold prices to acquire a premium in certain regions, the spot price of gold applies everywhere in the world. If, for instance, an event in Switzerland or China effects gold demand, the spot price responds worldwide.
Why can’t I buy gold at the spot price?
The spot price represents the lowest possible price at which mints and dealers can receive gold wholesale. The spot price does not include shipping costs and other operating expenses incurred by the seller or the manufacturer. Therefore, the seller adds a small premium or markup to each gold bullion product. These retailers invariably operate on small profit margins, so the spot price + premium system of pricing allows them to stay in business.
Does the spot price include markups or shipping costs?
No, the spot price is lowest wholesale price for an ounce of gold. Any costs associated with processing, fabricating, minting, or shipping that gold are incorporated into dealer markups or premiums.
Why are some gold products priced so much higher than others?
Some gold products are sold purely for their intrinsic value, or how much their underlying precious metal content is worth if melted. It stands to reason that these gold items would be priced closer to the spot price, allowing buyers to acquire as much of the pure metal as their dollar will buy them. Specialty gold items, however, may be accompanied by additional premiums (or markups) for a number of different reasons: greater production costs for highly artistic items, higher numismatic premiums for rare or collectible products, or a greater premium for enhanced security features designed to prevent counterfeiting.
How are the premiums over spot calculated? Are they the same for all gold products?
No; premiums over spot can vary greatly from one product to another. Generic products usually carry the lowest premiums over spot due to the lower cost of their manufacture. Standard-issue bullion coins, as well as popular name brand precious metal products, have middle-tier premiums that relate to consumer trust in the product and secondary market liquidity. Numismatic items such as graded coins and antique collectibles come with the highest premiums--oftentimes many times more than the intrinsic value of the coin--due to their rarity and special value to collectors.
What are bid and ask prices?
The bid price reflects the amount a dealer is willing to pay for one unit of a product sight unseen. The ask price is the price a dealer is willing to sell one unit of a product for. The difference is known as the dealer spread, the size of which is usually an indicator of the item’s liquidity.
What are gold futures contracts?
Future contracts (or simply “futures”) are an agreement between a buyer and seller to transact an exact amount of a commodity at a certain price at a later date, usually three months from the date of the contract. Since the prices quoted in future contracts are expectations of future prices, they hold a great deal of sway in influencing the spot price of gold.
What is the NYMEX?
The NYMEX is an exchange platform where futures for various commodities are traded. The trading of commodities futures has an impact on the price of all commodities including gold and silver. The term NYMEX is an acronym that stands for “New York Mercantile Exchange.” In 2008, it was purchased by the Chicago Mercantile Exchange (CME) Group.
What is the COMEX?
The COMEX is an exchange platform that is specifically meant for commodities trading. Currently, that COMEX operates as the commodities exchange division of the NYMEX, which merged with the COMEX in 1994. Precious metals futures, such as silver, gold and platinum, are all traded through the COMEX.
What is paper gold?
Paper gold includes all gold derivatives and exchange traded products (ETPs) that can be exchanged for physical gold. Essentially, paper gold is exactly what it sounds like: gold on paper. It is a claim to a share of gold, or hypothetical gold. Most traders do not take delivery of physical gold when they hold a gold contract, and choose instead to rollover the contract or sell it outright.
Do mining companies have any effect on the price of gold?
Although mining companies don’t have a direct effect on gold prices, mining activity can indirectly influence the markets. Due to the enormous cost of research and development, most mining enterprises incur large overhead costs; if the value of gold falls below a certain point, these miners won’t be profitable, and will likely elect to scale back production until prices rise to avoid taking a loss. Such an action could reduce the available supply of gold and thus the price could potentially increase.
Is gold traded 24 hours a day?
Yes; the presence of exchanges across the world in London, Hong Kong, Shanghai, Singapore, and Sydney ensures that gold is being bought and sold at any given moment.
Is physical gold taxed?
Any purchase of physical gold bullion is subject to the sales tax of the state in which the transaction takes place. (For interstate transactions, the state where the item being sold originates from is used.) If the order is over $500, any applicable sales taxes are waived. Any U.S. legal tender gold coins are also exempt from sales taxes, within the United States.
What is the gold/silver ratio?
The gold/silver ratio is the the ratio between the price of a troy ounce of gold and a troy ounce of silver. The gold ratio has been wither 15:1 or 16:1 for the majority of American history. However, in 1971 the “Nixon Shock” closed the gold window forever, and today that ratio is more than 70:1. Often times, investors will refer to the gold/silver ratio to attempt to determine if one of the precious metals is overpriced (or underpriced) relative to the other.
Why are there separate prices for bank wire and credit card transactions?
In order to offer our clients the lowest possible premiums over spot, it is necessary to reduce transactions costs between the seller and buyer. Because the precious metals industry involves constantly changing spot prices, dealers like ourselves operate on thin profit margins by selling in high volume. For this reason, we are able to offer lower prices on bank wire purchases because of the fees associated with credit card transactions.
If the spot price increases just before I make my online purchase, am I going to be charged a higher amount?
Yes. Because the spot price of gold fluctuates on a constant basis, the prices for individual items are set to recalibrate as often as every minute, and again before checkout. In the case of a bank wire purchase, the spot price will be locked in for 24 hours or until the next business day once your credit card has been secured for 5% of the total purchase price. Once payment is received, the 5% hold on your credit card will be voided. For more information on bankwire pricing, see our policy on bankwires.
Does the monetary denomination of a gold coin affect its overall value?
Not particularly. Having a legal tender status, in and of itself, can help increase the total value of a coin, but the actual monetary denomination ($1,$5,$10..etc) has little to no bearing on that value. Typically, the specific issuing country will have more effect on the total value of the coin. This is due to the credibility that can be conveyed by a country deciding to issue a particular coin a legal tender status. This can be seen in peoples preferences for coins minted by major economic powers of the world such as the U.S., China, Great Britain, or Canada.
Is it better to buy gold online?
Unlike traditional brick and mortar dealers, online gold retailers don’t have to pay many of the associated overhead costs that come with having local “in-person” stores. For this reason, many online retailers are able to pass those very savings onto their clients by offering lower premiums over the spot price of gold. Another advantage to shopping online is that you can shop 24 hours a day, and from the convenience of your own home. Most in person dealer are only open during business hours, making it difficult for the busy professional to find time to actually go into the store themselves.