Spot Prices

A spot price is the price at which a commodity could be transacted and delivered on right now. The spot price of gold refers to the price of one ounce of gold, and the spot price of silver refers to the price of one ounce of silver. Various metals must be of specific fineness requirements. The spot price is determined by the front month futures contract with the most volume. The spot price is important because it is the price at which buyers and sellers agree to value an asset. Spot prices are continually changing. They fluctuate according to varying supply and demand. Derivatives allow buys and sellers to “lock in” the price at which they buy or sell an asset in the future. Locking in prices with derivatives is one of the most common ways investors reduce risk.