The spot price is determined by a series of factors including supply, demand and futures prices. There are two different prices to be concerned with. The “Bid” price is the price you will be paid in the event you sell a commodity like gold or silver bullion. The “Ask” price is what you will pay when making a purchase. The difference between bid & ask is referred to as the spread.
The spread can be determined by a number of different market indexes, physical supply and demand and for other geo-political reasons. In a quiet market you can expect the spread between bid and ask to be tight, and when you have a highly volatile market there could be a much wider margin between the bid and the ask price. An educated gold bullion investor might ask a dealer what the spread is to gauge market activity.
The spot price is not typically what you pay when buying a physical commodity like gold bullion. The additional overhead above the spot price is otherwise known as the retail price. This price includes among other things broker commission, transportation and production. Keep in mind there are different degrees of retail for example high retail and low retail. On the other hand when you buy gold in the form of paper, a contract to buy gold or stock, you can expect to buy near the markets spot price for the commodities that you purchased.
Many precious metals investors keep an eye on the spot price on a daily basis. Companies like PrivateBullion.com, have a price alert tools that notifies you by text message or email when the spot price has hit a certain milestone or goal that you have. There are many different strategies used that involve the spot price, we recommend you discover a plan that secures your future and keeps your assets safe.
