Though precious metals have long been treasured for their beauty and rarity, they’ve also become a go-to commodity for investors. They provide portfolio diversification, act as a hedge against inflation, and can be converted to cash quickly. However, anyone interested in this type of investing should have a good understanding of how gold and silver values are determined. Like with most marketplace trading, precious metals rely on spot price. Gaining clarity on this concept will allow you to make more informed and confident decisions while navigating the precious metals market. 

Understanding Gold & Silver Spot Prices

What Is Spot Price?

Spot price is the current market value for which precious metals can be sold or purchased in that moment. It represents what 1 troy ounce of pure gold or silver is worth. These prices are usually uniform around the world despite constant fluctuations and exchange rates. Investors often consult spot prices before making financial choices regarding their gold and silver investments. For instance, when spot price is low, it may be a good time to purchase precious metals for a reduced cost, whereas a higher spot price could provide a chance to sell for a significant profit.

How It’s Calculated

While several considerations are taken into account when calculating the spot price of precious metals, it’s mainly determined by futures contracts. These are agreements to buy or sell a certain quantity of metals at a predetermined price and future date. When calculating spot prices, futures contracts are reviewed and those with the most volume for the closest month are used to help assess the value of precious metals. The month’s volume is an indication of how much buying and selling will occur in the future.

What Affects Spot Prices?

Spot prices are consistently changing throughout the day. They’re heavily influenced by supply and demand, which means a variety of factors can cause them to go up or down. This includes the strength of different currencies, interest rates, economic data, inflation or deflation, equity markets, geopolitical events, and actions of the Federal Reserve. As an example, during times of economic uncertainty or inflation, investors might be drawn to precious metals in droves as a way to secure safe-haven assets. In doing so, demand and prices would increase.

If you’re interested in gold and silver investing, we can help you learn more about spot price at Steve’s Precious Metals in Redding, CA. We’re a trusted source for buying and selling precious metals and are committed to providing fair payouts based on up-to-the-minute spot prices. Our staff will answer your questions and make sure you’re equipped with all the knowledge necessary to successfully maximize your return. Call (530) 223-0170 to make an appointment or visit us online for more information about our services.