Spot Price vs. Futures Price

There is usually a differing value between the Spot Price and the Futures Price of a commodity, lets use silver as an example and dive into the main differences.

The silver futures price and the live (spot) price of silver represent two different ways of valuing silver at different times:

1. Spot (Live) Price of Silver: This is the current price for immediate purchase and delivery of silver. It’s the price you would pay to buy silver “on the spot” and reflects the current market demand and supply. This price fluctuates in real-time during trading hours and is what you would usually see on live pricing websites.

2. Silver Futures Price: This is the price agreed upon today for the delivery of silver at a specified date in the future. Futures contracts are used by investors to hedge against price changes or to speculate on where silver prices may go. Since futures take into account factors like storage costs, interest rates, and market expectations about supply and demand, the futures price may be higher or lower than the spot price. The futures price is often determined by The Commodity Exchange (COMEX) and referred to on financial media outlets, such as CNBC.

Key Differences:

• Time: Spot price is for immediate settlement, while futures pricing is for contracts settled at a future date.

• Price Influences: Futures prices can reflect market expectations and additional costs, potentially causing futures to trade at a premium or discount to the spot price.

• Market Use: The spot price is more relevant for buying physical silver, while futures prices are often used by larger investors, traders, and institutions for speculation or hedging.

The two prices are often close but can diverge, especially during times of high volatility or changes in supply and demand expectations.

Happy Stacking,

JCSGOLD