Before You Invest In Gold, Learn How Spot Price Of Gold Is Determined - 6 Aspects

If you have been trading in gold for a while, you must know what a spot price is

. If you are just entering this business, you must learn how spot price of gold is determined as it is always a good idea to make informed choices and decisions.

Here are 6 aspects you should know about how spot price of gold is determined -

1.A discovery process of supply and demand plays a major role in gold spot price fixing. The major participants in the gold market are the buyers and sellers. Commodity futures market and OTC or over-the-counter cash market help with the discovery of ask and bid prices which are then posted immediately on the gold exchanges.

2.Physical exchange of gold is accounted for by the gold market's OTC segment. London fix is the spot gold price's benchmark that occurs twice a day. OTC cash market predominantly relies on this indictor. Some of the biggest London dealers from five bullion banks are involved in the AM and PM fix.

3.The current estimated gold price is first announced by the chairman of gold fix. Following this, number of buyers and sellers at that price are determined by the participating banks. if the sellers are lesser than the buyers, spot price is adjusted upwards. If sellers are more, it is adjusted downwards. This process continues till equilibrium is achieved to fix the new gold spot price.

4.Participation of retail gold traders in the market controls the commodity futures segment. Future contract market supply and demand determines the futures gold spot price. The sellers and buyers net effect at opening and closing positions is the reason why there is a constant change in the gold futures spot prices. This means, as compared to the OTC cash market, futures market experiences more fluctuations.

5.A lot of factors influence the gold spot price. Pressure is exerted on the prices by gold mining companies and large gold traders. These traders are in a position to adjust the price of gold as they wish.

6.When we talk of the widely dispersed supply and demand, supply is the flow from central bank sales, mine production and recycled gold while demand is jewelry, central bank purchases, investment and industrial.

Investors use spot price of gold mainly for investment decisions and commodity futures contract speculations.

by: Adrian Getty

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