Gold Spot Price Explained
The spot price of gold is the cash price for immediate delivery of physical metal, quoted in U.S. dollars per troy ounce. It is a market reference, not a price any buyer is guaranteed. Dealers sell above spot and buy back below it, so coins and bars cost more than spot.
You will see a "gold spot price" on news sites, dealer pages and Gold IRA brochures. It is the number everything else is measured against. It is also a number you usually cannot buy at. This page explains what it means and why. For the wider picture, see Gold and Precious Metals Basics for IRA Investors.
What is the gold spot price?
FINRA and the CFTC (the federal agency that oversees U.S. futures markets) define it in the same words. The spot price is "the cash price for immediate delivery of physical metal." They add that it "should be easy to get from financial news or quote providers" and is "quoted in dollars per troy ounce" (FINRA; CFTC).
A troy ounce is the weight unit used for precious metals. It is not the same as the ounce on a kitchen scale. See our page on troy ounce vs ounce for the difference.
FINRA gives a simple example. If the current spot price is $2,000, a half-ounce coin would be worth $1,000. That figure is for illustration only. It is not a current price and says nothing about where prices are headed.
Spot is a reference point. It is not a price list. Nobody is promised a trade at that exact number.
How is the gold spot price set?
There is no single official spot price. Different providers publish their own quotes, and they can differ slightly. The sources I opened for this page do not describe how each quote provider builds its number, so this page does not either. What they do show are the main places where gold prices are formed.
The London benchmark auctions
The LBMA Gold Price is "administered independently by ICE Benchmark Administration (IBA)" (LBMA). IBA says it runs electronic auctions for spot, unallocated "loco London" gold. Gold auctions are held at 10:30 and 15:00 London time, and the price for each auction is set in U.S. dollars (IBA). IBA also publishes the benchmark in British pounds and euros, converted at prevailing spot exchange rates.
These are the "AM" and "PM" prices people refer to. Many contracts and price lists use them as a reference.
The futures market
Gold also trades as futures contracts. A futures contract is an agreement to buy or sell at a set price on a future date. On CME Group's COMEX exchange, the standard gold futures contract covers 100 troy ounces, is quoted in U.S. dollars and cents per troy ounce, and is physically settled (CME Group fact card). It trades on CME Globex from Sunday 5:00 p.m. to Friday 4:00 p.m. Central time, with a 60-minute break each day.
Futures prices and spot prices are related but not identical. A futures price is for delivery in a particular month. A spot price is for immediate delivery. I did not find a regulator or exchange page that explains exactly how the two are linked, so this page makes no claim beyond that definition.
Quick comparison
| Term | What it is | Where it comes from |
|---|---|---|
| Spot price | Cash price for immediate delivery of physical metal, in dollars per troy ounce | Quote providers and news sites (FINRA, CFTC) |
| LBMA Gold Price | Benchmark set in electronic auctions at 10:30 and 15:00 London time | IBA, the independent administrator (LBMA, IBA) |
| COMEX gold futures | Contract for 100 troy ounces, delivery in a stated month | CME Group (fact card) |
| Dealer sell price | Spot plus the dealer's markup or "premium" | The dealer (FINRA, CFTC) |
| Dealer buy price | Below spot | The dealer (FINRA, CFTC) |
Why can't you buy gold at spot?
Because dealers have to make money and cover costs. FINRA and the CFTC both say "A dealer will always sell metal above the spot price and buy it back below the spot price." The gap between the two prices "is known as the dealer's spread."
Two terms matter here:
- Premium (or markup). What the dealer adds above spot when selling. The CFTC and FINRA describe the retail price as spot "plus the dealer's markup or 'premium.'"
- Spread. The difference between the dealer's selling price and buying price. It is the round-trip cost of buying and later selling back to the same dealer.
The U.S. Mint shows the same pattern at the wholesale level. It says prices for American Eagle coins are based on the prevailing price of the metal plus a premium, and that for gold American Eagles its Authorized Purchasers are charged the LBMA PM Gold Price plus a percentage premium. The Mint lists 3% for 1-ounce coins, 5% for half-ounce, 7% for quarter-ounce and 9% for tenth-ounce coins, and reserves the right to change its premium structure (U.S. Mint). The page also says the Mint is not currently accepting applications for new Authorized Purchasers. Those percentages apply to Authorized Purchasers, which the Mint says form a two-way market with wholesalers, financial institutions and other retailers. They are not what an individual pays. The pattern is what matters: smaller coins carry a higher percentage premium than larger ones.
How big can the spread be?
It varies a lot. FINRA and the CFTC note that some fraudulent dealers have charged spreads of more than 300 percent. FINRA adds that other dealers may charge less than 20 percent. FINRA also warns that the greater the spread and other costs, the more the spot price would have to rise before a buyer breaks even, and that if the spread is too high, as in most frauds, "it's impossible for buyers to ever profit."
That does not mean every premium is a red flag. It means the premium is a real cost and should be known before you buy.
How does spot relate to what a Gold IRA pays?
A Gold IRA is a self-directed IRA that holds physical metal. The metal still has to be bought from a dealer, so the dealer's premium applies. The IRS says IRA bullion must meet a fineness standard and be held by a bank or approved non-bank trustee (IRS). See Gold IRA rules for the full picture.
Ask these questions before any purchase:
- What is the total price per coin or bar, in writing?
- What spot price is the quote based on, and at what time?
- What is the premium, in dollars and as a percent over spot?
- What would you pay to buy it back, and what is the spread?
- Are commissions and fees included in the spread or charged separately?
FINRA advises asking for all fees, costs, commissions and the agreed retail price in writing, and says that if fees are not available in writing before your purchase, that is a red flag. The CFTC gives similar advice. Custodian and storage charges are separate from the dealer's premium. See Gold IRA fees.
A worked example of comparing prices
FINRA suggests multiplying the weight of the metal by the current spot price and comparing that to the price quoted. The numbers below are made up to show the method. They are not real prices.
| Dealer A | Dealer B | |
|---|---|---|
| Spot price used (assumed) | $2,000 per troy oz | $2,000 per troy oz |
| Coin weight of gold | 1 troy oz | 1 troy oz |
| Value at spot | $2,000 | $2,000 |
| Quoted sell price (assumed) | $2,100 | $2,200 |
| Premium over spot | $100 (5%) | $200 (10%) |
| Quoted buy-back price (assumed) | $1,960 | $1,900 |
| Spread (sell minus buy-back) | $140 | $300 |
In this made-up case, Dealer B's coin costs $100 more and returns $60 less on a buy-back. The spot price would have to rise further before a buyer breaks even. FINRA also reminds buyers to compare actual weight and price when looking at specific coins or ingots.
Common mistakes and edge cases
- Comparing quotes taken at different times. Spot moves. Check the time on any quote.
- Mixing up spot and futures prices. The two are quoted for different delivery terms.
- Assuming "spot plus a few dollars" is normal. Premiums differ by product and dealer. Compare in writing.
- Looking only at the sell price. The buy-back price decides what you could get back.
- Treating spot as a forecast. It describes the market now. It does not say where gold will go next, and this site does not predict prices.
- Ignoring other costs. Custodian, storage and shipping costs sit on top of the premium.
Related questions
Is the spot price the same everywhere?
No. FINRA and the CFTC say it should be easy to get from news or quote providers, but the sources I opened do not say all providers show the same number. Check the source and time of any quote.
Is the LBMA price the spot price?
The LBMA Gold Price is a benchmark set in IBA auctions for spot, unallocated London gold, at 10:30 and 15:00 London time. It is one widely used reference. Other quotes exist.
Does a higher spot price mean a better deal?
No. Spot tells you the reference price, not whether a dealer's premium is fair. To judge a deal, compare the total price to the weight times spot, and compare buy-back terms.
Where can I learn what moves gold prices?
See what drives gold prices for the factors people discuss. Understanding them does not let anyone predict the price.
This page is general education, not investment, tax or legal advice. Gold and silver prices can fall as well as rise. Talk to a qualified tax professional or fiduciary adviser about your own situation.
Sources
- Investor Bulletin: 10 Things to Ask Before Buying Physical Gold, Silver or Other Metals, FINRA. Accessed Invalid Date.
- Customer Advisory: 10 Things to Ask Before Buying Physical Gold, Silver, or Other Metals, Commodity Futures Trading Commission. Accessed Invalid Date.
- LBMA Gold Price, LBMA. Accessed Invalid Date.
- LBMA Gold Price, ICE Benchmark Administration. Accessed Invalid Date.
- Gold Futures and Options (fact card), CME Group. Accessed Invalid Date.
- Becoming an Authorized Purchaser, U.S. Mint. Accessed Invalid Date.
- Investments in collectibles in individually directed qualified plan accounts, Internal Revenue Service. Accessed Invalid Date.
This guide is general education, not personalized financial, tax or legal advice. See our financial disclaimer, editorial policy and advertising disclosure.