Gold (GC=F) futures opened at $4,330 per troy ounce Monday, nearly even with Friday’s closing price of $4,328.30. The price of gold moved above $4,370 in early trading.
After the widely anticipated rate reduction by the Fed last week, gold traders are looking ahead to the Fed’s next rate action. One complication — for the Fed and those trying to predict the Fed’s next move — is the delay or cancellation of key economic reports on labor, inflation, and spending due to the government shutdown.
Speeches from two Fed governors on Monday could provide more insight in the short term. Governor Stephen Miran, who has argued for larger interest-rate reductions, will discuss the inflation outlook at Columbia University at 9:30 a.m. ET. New York Fed President John Williams will hold a press conference in New Jersey at 10:30 a.m. E.T., after meeting with local business and community leaders.
Interest rates affect gold prices by changing the income available from yield-bearing assets like cash. When cash yields are lower, gold looks more attractive by comparison.
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Learn more: Gold vs. crypto: Which should investors own in debasement trade?
The price of gold can be quoted in multiple forms because the precious metal is traded in different ways. The two main gold prices investors should know about are spot prices and gold futures prices.
Learn more: How to invest in gold in 4 steps
The spot price of gold is the current market price per ounce for physical gold as a raw material, sometimes called spot gold. Gold ETFs that are backed by physical gold assets generally track the gold spot price.
The spot price is lower than what you’d pay to buy gold coins, bullion, or jewelry, since your total price will include a markup called the gold premium that covers refining, marketing, dealer overhead, and profits. The spot price is more like a wholesale price, and the spot price plus the gold premium is the retail price.
Learn more: Thinking of buying gold? Here’s what investors should watch for.
Gold futures are contracts that mandate a gold transaction at a specific price on a future date. These contracts are exchange-traded and more liquid than physical gold. They settle on the contract expiration date or earlier, either financially or via delivery. A financial cash settlement involves paying the contract’s profit or loss in cash. Delivery means the seller sends physical gold to the buyer for the contracted price.
Supply and demand determine gold spot prices and gold futures prices. Factors that influence gold supply and demand include:
Geopolitical events
Central bank buying trends
Inflation
Interest rates
Mining production
Learn more: Who decides what gold is worth? How prices are determined.
Whether you’re tracking the price of gold since last month or last year, the price-of-gold chart below shows the precious metal’s steady upward climb in value.
