Spot, Futures or Retail: Why Gold Has Three Different Prices
OroTracker Editorial Team ·
Take a look at three different websites and you'll find three different prices for gold. One lists a spot price, one a COMEX futures price and a dealer a coin price higher than that. There are none of them that are incorrect. They tell about three transactions, and understanding the difference can mean real cash for you.
This article describes each of these prices, their differences and how to compare them with the OroTracker live charts and the OroTracker premium calculator.
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The spot price
The spot price refers to the price of gold for immediate delivery - within the standard settlement period. The London over-the-counter (OTC) market is the main wholesale gold trading market in the world, and spot trades typically settle within two business days. The price is quoted in U.S. dollars per troy ounce of 99.5% pure fine gold (London Good Delivery bars).
Spot is not tied to a specific exchange. It is the price that banks and bullion dealers agree on for large quantity trades, and it is updated continuously. Data vendors assemble it into a single reference quote, so small differences can appear across websites.
Spot is the base for all other gold prices. The jeweler or coin dealer prices you by adding their costs to spot.
The futures price
A futures contract is a contract to buy or sell gold at a predetermined price at a set future date. The most popular is gold futures on CME Group's COMEX, with a standard contract size of 100 troy ounces and a smaller Micro Gold contract of 10 ounces. Contracts expire on specific months, and most traders exit before delivery without taking physical gold.
A futures price is normally a little above the spot price. This difference - the cost of carry - reflects financing and storage costs. Generally, futures trade at a higher premium when interest rates are high. This premium is known as contango. Under rare circumstances of physical shortage, futures prices may fall below spot prices - this is known as backwardation.
For example: if spot is $2,000/oz and the annual financing rate is 4%, the 3-month cost of carry is approximately 1%, or $20/oz, giving a theoretical futures price of around $2,020. As expiration nears, the spread shrinks toward zero since an expiring contract is equivalent to a spot trade.
The retail price
The retail price is what an individual pays for physical gold from a dealer, jeweler or mint. It equals spot plus a premium, which includes: the cost of making a coin, bar or jewelry; distribution, packaging and shipping; the dealer's operating costs and profit; and insurance and, in some countries, taxes or import duties.
Prices vary by product. The larger the bar, the lower the premium per ounce. Small bars, popular sovereign coins and one-gram pieces carry the highest premiums. Premiums also expand in periods of high demand when physical supply is tight.
When you sell, the dealer pays you below spot - the bid price. The spread between what you pay and what you receive is the most underrated cost of owning gold.
A worked example
Assume the spot gold price is $2,000/oz:
- Spot: $2,000/oz - wholesale, within 2 business days delivery.
- Three-month futures: approximately $2,020 - reflecting financing costs (contango).
- Retail one-ounce coin: $2,000 + 5% premium = $2,100, before shipping and taxes.
If you sell back to the same dealer at a 1% discount to spot ($1,980), the round-trip cost is $120/oz - about 6% of spot. Gold must rise by 6% just to break even. Knowing that gap informs whether you should buy physical gold, an ETF or a futures-based product.
Frequently asked questions
Why am I paying more than the spot price at a dealer?
The dealer adds fabrication, distribution, insurance and profit margin to spot. That is a normal premium - the question is whether the size of the premium is competitive compared to other dealers.
Can futures prices be less than spot?
Yes. Backwardation is unusual and often associated with tight physical supply or unusual market stress.
Which is the 'real' gold price?
They are all real. Spot is the best single indicator of the underlying market price, but each price describes a different transaction.
Do I need to take delivery on a futures contract?
No. The majority of traders close or roll over positions before the contract expires.
Conclusion: Which price should you use?
Use spot for tracking the market - it is the purest indicator of the global price. When trading, use the futures contract you actually trade. When buying jewelry or coins, reference spot to judge whether a dealer's premium is fair: divide the quoted price by the gold content to find the effective premium percentage.
Sources and further reading
- CME Group, COMEX Gold Futures contract specifications and education pages.
- LBMA (London Bullion Market Association), Good Delivery Rules and the LBMA Gold Price methodology.
- World Gold Council, Gold Spot Price explainers on Goldhub.
Disclaimer: This article is for general education only and is not financial, investment, tax or legal advice. Futures contracts are leveraged and can result in losses greater than your initial deposit.