The spot gold definition is a contract of buying or selling gold on the spot date, which is two business days, normally, after the trade date. If an individual transfers gold for cash, the spot price is the going rate for this direct transfer.
This spot gold definition takes into account the size of spot markets trade. There is a natural barrier to entry in the spot gold market, in that the minimum transaction restrictions are as high as a half a million dollars. This is because the spot markets trade units are large, with each individual bar of gold having a value between $8,000 and $32,000. However, even if relatively few buyers can participate in this market, spot gold prices are still used as the standard benchmark for individual gold transactions that are not considered to be spot gold transactions. The global spot market has uniformity, in that the spot prices worldwide are set by London twice a day with their two price fixes a day.
Spot gold definition also takes into account the fluctuation of the spot price of gold. When currency markets change, gold prices may fluctuate. These fluctuations affect the relative value of the diverse spot markets. Spot markets may also have some volatility because they are based on current supply and demand, as opposed to being based upon future price movements. Prices for individuals may be higher than spot because gold bullion supply is not necessarily equivalent to the investment bars supply, making the supply to individuals tighter.
Spot gold is usually lower than future prices, as future prices takes into account the costs of storage and the effect of speculation. In some cases, however, the price for spot gold is higher than the futures prices. This would suggest that there are doubts regarding how available gold will be in the future.