Eric Sepanek
SBC Founder
Eric Sepanek is the founder of Scottsdale Bullion & Coin, established in 2011. With extensive experience in the precious metals industry, he is dedicated to educating Americans on the wealth preservation power of gold and silver.
Value is the single most important piece of information when making gold investments. All other considerations follow from this crucial factor. Unfortunately, investors entering the precious metals space for the first time are often confused by the variety of gold pricing mechanisms.
You’ve got spot prices, futures prices, COMEX prices, and LMBA prices. Each system has a distinct purpose and influence within the gold market. Helping investors understand the nuances of these gold pricing frameworks can provide a more informed and profitable decision when purchasing gold.
Understanding the Differences Between Gold Price Markets
| Spot Price | Futures Price | LBMA Price | COMEX Price | |
|---|---|---|---|---|
| Definition | Current price for immediate physical delivery | Agreed-upon future price for delivery on a pre-determined date | Global benchmark for unallocated gold delivered in London | Standard for gold futures traded on COMEX exchange |
| Delivery | Immediate | Contract maturity | Immediate | Contract maturity |
| Participants | Bullion banks, precious metals and coin dealers retail investors | Futures traders, speculators, hedgers | Major banks, bullion dealers, large institutions | Futures traders, speculators, hedgers |
| Asset Type | Physical gold (i.e. bullion bars and coins, jewelry, etc) | Paper gold futures contracts | Physical gold (i.e. bank reserves, gold-backed financial products, etc) | Paper gold futures contracts |
| Usage | Reference for Over the counter (OTC), real-time physical gold transactions | Base pricing for futures trading and influences spot price | Benchmark for physical gold transactions and gold-backed products | Standard for gold futures contracts |
| Oversight | Hybrid (i.e. LBMA, COMEX, etc) | Commodity Futures Trading Commission (CTFC) and exchange rules | Financial Conduct Authority (FCA) and ICE Benchmark Administration (ICA) | CME Group |
| Venues | OTC market | Futures exchanges | Electronic auction platform owned by ICE Benchmark Administration (IBA); OTC market | COMEX; other futures exchanges |
| Pricing Factors | Supply and demand, market sentiment, USD strength, liquidity, futures price | Futures market dynamics, market speculation, hedging activities | Supply and demand, market consensus, central bank trading | Futures market dynamics, market speculation, hedging activities |
| Influence | Global | Global, with focus on US market | Global, with focus on UK market | Global, with focus on US market |
Gold Spot Price
The gold spot price is the value at which physical gold can be bought or sold for immediate delivery. This evaluation is set “on the spot” at the moment of the transaction, offering investors real-time quotes. The gold spot price emerges organically from the worldwide over-the-counter (OTC) market of physical gold trading, rather than being determined by a single entity or exchange. All traders involved in the buying and selling of physical gold – including bullion banks, refiners, dealers, and retail investors – collectively shape the spot price.
The constant quoting of bid and ask prices results in an ever-changing average price for OTC transactions. That’s why gold prices are never stationary. The resulting gold spot price is quoted in a specific currency per ounce (i.e. $2,400/oz) to reflect pricing in local currencies. Investors end up paying slightly above the spot price for gold assets due to dealer premiums which cover overhead costs incurred by dealers.
Gold Futures Price
Gold futures represent the agreed-upon value of gold for delivery at a predetermined date in the future. These evaluations are influenced by futures markets where traders buy and sell gold through futures contracts which specify the amount of gold, delivery date, and transaction price. Gold futures contracts can have delivery dates as early as the next calendar month or years into the future. However, most gold futures contracts occur within a few months. Gold futures prices can be higher (contango) or lower (backwardation) than the spot price of gold, depending on the anticipated price action.
There’s a bidirectional relationship between gold futures and the spot price which greatly influence each other. Similar to the spot price, the value of gold futures is the natural product of active and ongoing trading rather than a top-down evaluation. Unlike the spot price of gold which deals with physical assets, gold futures are associated with paper gold assets. As a result, those investing in gold bullion rarely engage with this pricing mechanism.
COMEX Gold Price
The COMEX gold price is a global standard for gold futures contracts, representing the anticipated value of gold for future delivery at a predetermined date. Administered by the CME Group, the COMEX gold price is determined through the active buying and selling of gold futures contracts on the Commodity Exchange Inc. (COMEX), a division of the New York Mercantile Exchange (NYMEX).
Instead of representing an average of trades, the COMEX price reflects the market consensus regarding the price of gold for future delivery. This evaluation is influenced by a complex array of factors including electronic order matching, supply and demand, market sentiment, and settlement prices. Similar to the spot price of gold, the COMEX gold price is constantly updating to reflect the real-time price of gold futures.
LBMA Gold Price
The LBMA gold price is an internationally recognized standard for evaluating physical gold assets for immediate delivery. Although the London Bullion Market Association (LBMA) oversees the process, the LBMA gold price is determined by an independent group of hand-picked participants known as the ICE Benchmark Administration (ICA). Currently, the 15 members include:
- Bank of China
- Citibank, N.A. London Branch
- Coins ‘N Things Inc.
- DRW Investments, LLC
- Goldman Sachs
- HSBC Bank USA NA
- Industrial and Commercial Bank of China (ICBC)
- Jane Street Global Trading, LLC
- JPMorgan Chase Bank, N.A. London Branch
- Koch Supply and Trading LP
- Marex
- Morgan Stanley
- Standard Chartered Bank
- StoneX Financial Ltd
- Toronto-Dominion Bank
This group of esteemed banks, bullion dealers, and other financial institutions submits buy and sell orders for gold in multiple auction rounds. An aggregation of these orders is reflected in the LBMA price. The LBMA gold price is set twice daily (10:30 am and 3:00 pm UTC) in US dollars. Although the LBMA gold price is formally intended for use among IBA participants, it’s been adopted as a defacto benchmark price for the global gold market.
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