How are Gold Rates Determined?

Determining the value of gold is not as straightforward as pricing assets. Gold is dealt with by the four types of firms in the industry. They are exploration or development, mining, consumers and recyclers. The 3 categories of consumers are industrial, jewellery producers and investors.

Gold prices are fixed on a daily basis. It is an agreement between the participants on the same side in the market to buy and sell gold at a fixed price or to maintain the market conditions to make the price stay at a certain level by controlling the supply and demand. Gold Fixing is done at London Bullion Market Association. The prices are set daily at 10:30 am GMT and 3pm GMT in US dollars.

Types of prices

There are 2 types of prices, spot price and futures price.

Spot price

This is the current market price at which gold was bought or sold for immediate payment and delivery.

Futures price

This is the price at which the participants in a futures contract agree to transact on the date of settlement.