Spot Market
Also: Cash market, Spot trading, Spot rate market
The spot market is the market for immediate delivery of precious metals at the currently prevailing spot price.
The spot market (also cash market) refers to the market on which precious metals are traded immediately — that is, for immediate or near-immediate delivery — at the currently prevailing spot price. In contrast to futures markets, the purchase price is agreed today and the metal is physically transferred or credited to a metal account within typically two business days (T+2). The gold price and silver price that appear on price portals and in the media always originate from the spot market.
How the Spot Market Works
Spot trading in precious metals takes place predominantly over the counter (OTC), meaning directly between banks, dealers and institutional market participants outside of regulated exchanges. The heart of the global gold spot market is the London market supervised by the LBMA (London Bullion Market Association). Zurich, New York and Shanghai complete the 24-hour cycle.
Price formation in the spot market follows the classic supply and demand principle: market makers continuously quote bid and ask prices — the difference is called the spread. The global consensus spot price is quoted in US dollars per troy ounce and is updated to the second.
Spot Market vs. Futures Market — a Comparison
| Feature | Spot market | Futures market |
|---|---|---|
| Delivery | T+2 (immediate) | Fixed expiry date in the future |
| Price determination | Continuous, OTC | Exchange (e.g. COMEX), standardised |
| Main participants | Banks, dealers, central banks | Speculators, hedgers, producers |
| Leverage | Low (physical) | High (margin) |
| Physical delivery | Common | Rare (usually cash settlement) |
Price Components in Spot Trading
When a private investor buys physical gold or silver, they do not pay the pure spot price but a dealer price composed of several mark-ups:
Dealer price = Spot price + Premium (agio) + VAT (for silver/platinum/palladium)
The premium (agio) covers minting, logistics, insurance and dealer margin. For investment gold, VAT is waived (§ 25c UStG in Germany). Note: tax details should be clarified with a tax adviser — this is not tax or investment advice.
Key Trading Centres at a Glance
- London (LBMA) — the world's largest OTC gold market; the daily LBMA fixing is also determined here.
- New York (COMEX) — the leading futures exchange, whose futures prices are closely correlated with the spot price.
- Zurich — traditional physical trading centre of the major Swiss banks.
- Shanghai (SGE/SHFE) — a growing spot market for the Asia-Pacific region, quoted in CNY/g.
Impact on the Private Investor
The spot market is the reference basis for all buying prices from dealers as well as for ETCs such as Xetra-Gold or gold savings plan products. Since the price fluctuates around the clock, it is worth keeping an eye on exchange rates (the EUR/USD rate directly influences the EUR price) and on historical price trends.
Key Takeaway
The spot market sets the global reference price for precious metals in real time — anyone buying or selling always orients themselves to this price, but always pays or receives premiums or discounts on top of it.