Will the Real Price of Gold Please Stand Up
by ilene - September 4th, 2009 10:23 am
This caught my eye – what is the real price of gold?
Will the Real Price of Gold Please Stand Up
By Terry Coxon, Editor, Casey’s Gold & Resource Report
Gold is traded around the clock and in so many places and in so many forms, ranging from the abstractions of futures contracts to the solid tangibility of rings and bracelets, that it’s not clear what the “real” price is. The question is more than a matter of curiosity, since many retail coin and bullion shops quote selling prices in terms of “spot plus X%” or “spot plus $Y.” When you talk to a dealer, what exactly does he mean when he refers to “spot”?
Here are some of the prices that dealers refer to and that you may see reported in the media.
London fix. The five members of the London Gold Pool confer twice daily to determine the a.m. and p.m. price for gold. These are big players, so the fixings they announce have a quasi-official ring to them. But the London fixings determine the price only for trades that by pre-agreement are tied to the fixings. And each fixing has significance only at the instant it’s made. Trading between fixings runs on its own, independently of the preceding fix.
Comex spot contract price. The Comex is the busiest market for trading futures contracts in gold bullion. Each contract is for 100 ounces. Prices during the day represent actual trades taking place in a continuous, competitive auction. When, through the passage of time, a given contract reaches its delivery month, it becomes known as the “spot contract.” At that point, the party on the long side of the contact is free to pay for the physical and demand delivery, and the party on the short side of the contract is free to deliver the gold and demand payment. The possibility of insisting on physical delivery keeps the price on the spot contract tightly linked to the price on large transactions of physical gold between dealers.
New York dealer prices. If you visit www.kitco.com, you’ll find quotes, updated every 30 seconds, for the “New York Spot Price.” These reflect the bid and ask prices quoted by wholesale dealers for spot delivery. Not surprisingly, during Comex trading hours, they track the Comex price for the spot contract.
And there are other sources of prices. For many…