What does the SPOT price of gold refer to?


The spot price of gold refers to the current market price at which gold can be bought or sold for immediate delivery. It reflects the price of gold in real-time, based on the latest supply and demand dynamics within the bullion market. The LBMA (London Bullion Market Association) is the primary authority for setting the official price of precious metals such as gold, silver, platinum, and palladium. All reputable bullion dealers such as Hatton Garden Metals, typically buy and sell based on these benchmark prices.

The term "spot" comes from the fact that transactions are settled "on the spot," meaning that the gold is exchanged and delivered almost immediately.

This price is influenced by a variety of factors, such as the following:

  • Global economic conditions (like inflation, interest rates, or geopolitical events)

  • Market demand for physical gold or gold-based financial products

  • Currency fluctuations (especially the US dollar and GBP)

  • Gold mining output and supply from central banks

    In essence, the spot price is the benchmark that drives the cost of gold-related products and investments like jewellery, bullion, or gold futures.

    So how is the spot pricing used within the bullion market?


    Within the bullion market, the spot price of gold plays a crucial role in determining the price of gold bullion products like coins, bars, and rounds. Here's just a few ways how it's used as an essential tool for bullion companies:


    1. Benchmark for Transactions

  • The spot price serves as the foundation for pricing physical gold. When a buyer wants to purchase gold bullion, the price is typically calculated by adding a premium to the current spot price. The premium accounts for factors such as minting, packaging, distribution, and dealer markups.

  • For example, if the spot price of gold is £2230 per ounce, a gold coin may be sold for £2260, reflecting the spot price plus a dealer’s premium.


    2. Gold Dealers' Pricing

  • Gold dealers use the spot price to set the buying and selling prices of bullion. When buying gold, dealers will typically offer slightly below the spot price (for the purpose of making a profit), while when selling to customers, the price will be slightly above the spot price.

  • However some bullion companies work against the gold fixes, The Gold AM and PM Fix refer to two key benchmark prices set each day for gold in the global market. These prices are determined through a process conducted by a group of major banks and financial institutions, and they serve as important reference points for traders, investors, and central banks. Hatton Garden Metals purchase all our precious metal in against the AM fixes of the day.


    3. Influencing Premiums for Coins & Bars

  • The spot price sets the baseline, but the premium over the spot price can vary depending on the form of bullion.

  • Gold bars typically have lower premiums, as they are more standardized and easier to manufacture in large quantities.

  • Gold coins tend to carry higher premiums, especially for popular or collectible coins such as the shieldback sovereign due to minting, rarity, and collector demand.


    4. Impact of Market Movements

  • As the spot price fluctuates due to market conditions (such as inflation, interest rates, or geopolitical events), the price of bullion products moves accordingly. If the spot price rises, the cost of buying physical gold increases, and if it falls, the price of bullion decreases.

  • The spot price is updated regularly throughout the trading day to reflect these market changes, this updates every 30 seconds, so both buyers and sellers stay aligned with the current value of gold.


    In summary, the spot price is the foundation of the bullion market, driving the pricing of physical gold, influencing gold futures, and determining the premiums that buyers pay for gold products. It ensures that gold transactions are anchored to a real-time, transparent market price that enables trusted bullion traders such as Hatton Garden Metals and all potential investors.