Reading a Spot Gold or Spot Silver quote is very similar to reading a FOREX quote. Quotes for Spot Metals are represented in the same way as quotes for currency pairs. Spot Gold traded against the U.S. Dollar is XAU/USD and Spot Silver traded against the U.S. Dollar is XAG/USD.
Spot Metal prices are quoted internationally in U.S. Dollar per troy ounce, so for a quote of XAU/USD 1,550.25, 1 oz of gold is equal to $1,550.25.
When the quote for Spot Gold goes up, this means that Spot Gold has strengthened in value and is now worth more dollars than before. Conversely, when the quote for Spot Gold goes down, this means that the value of Spot Gold has weakened compared to the U.S. Dollar, and it is therefore worth fewer dollars than before.
Bids, Asks and the Spread
Just like other markets, Spot Gold and Spot Silver quotes consist of the BID and the ASK:
The BID is the price at which you can SELL.
The ASK is the price at which you can BUY.
The difference between the Bid and Ask prices is called the Spread, and represents the cost of trading.
Trading Spot Metals
Spot Metals are quoted internationally in U.S. Dollar per troy ounce and trading takes place in “lots”. A standard lot of Spot Gold is 100oz and a mini lot of Spot Gold is 1oz. A standard lot of Spot Silver is 5,000oz and a mini lot of Spot Silver is 50 oz.
A typical quote you might receive for Spot Gold is 1,550.25/75. This means that you could sell at 1,550.25, or buy at 1,550.75. The spread is the difference between these two prices (1,550.75-1,550.25) or 0.50, and represents the cost of trading.
The smallest amount that you can trade is normally 1 troy oz for Spot Gold and 50 troy oz for Spot Silver.
Pips or Points
Like FOREX prices, Spot Metals prices are quoted in very small increments called pips or “percentage in point”. A pip refers to the second decimal place for a Spot Metals quote or 0.01.
Each pip represents 1 cent in U.S. Dollar value.
When calculating the value of your trade, remember that Spot Metals trade in lots. For Spot Gold, a lot is 100 oz, which means that a one pip (1 cent) movement in the gold price represents a $1.00 U.S. Dollar price movement for each lot that you are trading.
