Today, the price of gold is just over $3,300 per ounce. But where does that number come from? And why do different sources quote different prices?
In this episode of the Money Metals' Midweek Memo podcast, host Mike Maharrey takes a deep dive into the sometimes confusing world of gold pricing. He explains the difference between spot, futures, and fixed prices, and what each price tells you about the market.
This week, Mike also covers another milestone for gold and offers some tips on navigating and making sense of the markets in these chaotic times when prices whipsaw with the latest post on social media.
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Mike opens the show by explaining the chaos he experienced playing goalie in a recent hockey game.
"I really had to focus on staying calm and on the fundamentals. I was thinking about that game later, and it occurred to me it’s a lot like the markets right now.
"If you’ve been watching the gold price, you’ve seen the big swings, $25, $50 moves within matters of hours. There is so much uncertainty right now. I think that’s going to be the norm for a while because it is the nature of our president. Tariffs are on. Tariffs are off. They’re on some things. No, they’re off. But they might be back. Or not.
"It’s like my hockey game. You have to stay calm. You have to focus on the fundamentals."
Mike noted that amid this chaos, gold recently hit yet another milestone, although this one went under the radar. It took out its all-time high in "real" terms.
"When we talk about an asset's 'real' price, we’re referring to the price adjusted for price inflation as measured by the CPI. So, how has gold done on a 'real' inflation-adjusted basis?
"On April 22, gold cracked $3,500 at its intraday high. That broke the previous high of $3,493 in today’s dollar terms set on January 21, 1980, when the yellow metal hit an intra-day high of $850.
"Gold also touched an inflation-adjusted high last fall. Of course, price inflation has increased since then, raising the value of $850 in 1980s dollars even higher."
Mike explains the context of that record set in 1980 and noted that the price didn't stay at those levels long.
"The fact that gold has traded below its 1980 real price high for decades doesn’t mean the yellow metal 'hasn’t kept up with inflation,' as some people claim. That year was an anomaly. Through most periods, the price of gold has outpaced inflation as measured by the CPI and has served as an excellent inflation hedge. In other words, if you bought gold virtually any time after 1980 and held it until today have been well ahead of inflation. And now, you're on pace with price inflation even if you bought at the peak in 1980."
Speaking of pricing, how is the gold price determined?
"Quite frankly, it can be a little confusing. You might look at different tickers at the same time and see some pretty significant discrepancies in price. The thing is, there is always more than one price for gold at any given time! There are actually three main prices you’ll see quoted."
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Mike then breaks down gold pricing, starting with the "spot price."
"When you visit MoneyMetals.com and check the price ticker, you’re seeing the 'spot price' of gold. That reflects the current market price for immediate delivery and serves as the benchmark for real-time pricing and trading activity. The spot price isn’t 'set' by any single entity. It is determined by decentralized, global market activity. The spot price you see quoted on various financial news platforms is a composite derived from real-time trades across multiple exchanges and trading platforms."
The spot price is the starting point for retail transactions. On top of that, you will generally pay a premium. As Mike explains, it will vary depending on the product, and supply and demand dynamics.
You will often see news outlets quoting the “futures price” instead of the spot price. This represents the agreed-upon contracted price for gold delivered at some future date, and it reflects the market’s expectation of the price of gold at the time the contract expires.
Mike explains the basics of futures contracts and why futures prices can diverge significantly from the spot price.
The third price you'll often see is the London gold price, sometimes referred to as the London gold fix.
"This establishes a globally recognized benchmark price used by financial institutions, central banks, and investors. This price is set by twice-daily auctions held by the London Bullion Market Association (LBMA)."
Mike explains how the auction works and why the LBMA price is significant.
Mike points out that no matter how you price it, gold is getting more expensive. Now is the time to get in on this gold and silver bull market. He notes that, as he talked about last week, silver is historically underpriced. That makes now the time to call 800-800-1865 and talk with a Money Metals precious metals specialist.
Articles Mentioned in the Show
Gold's Role as an Inflation Hedge in the 21st Century
Gold Isn't Going Up -- Your Money Is Just Losing Value
Can the Gold Bull Keep Up This Pace?
About the Author
Mike Maharrey is a journalist and market analyst for Money Metals with over a decade of experience in precious metals. He holds a BS in accounting from the University of Kentucky and a BA in journalism from the University of South Florida.
