Precious metals markets use specialized terminology that can confuse new investors. Understanding these terms is essential for analyzing prices, reading market commentary and executing trades effectively.
Spot price is the current market price at which an asset can be bought or sold for immediate delivery. Gold and silver spot prices are typically quoted in U.S. dollars per troy ounce and serve as the benchmark for physical and derivative contracts.
Troy ounce is the standard unit of weight for precious metals, equal to approximately 31.1035 grams. It is different from the avoirdupois ounce (28.35 grams) used for everyday goods, so investors should be careful when comparing weights.
Contango and backwardation describe the relationship between spot prices and futures prices. Contango occurs when futures trade above the spot price, usually reflecting storage and financing costs. Backwardation occurs when futures trade below spot, often signaling tight immediate supply.
Bid-ask spread is the difference between the highest price a buyer is willing to pay and the lowest price a seller will accept. Wider spreads indicate lower liquidity or higher uncertainty.
Premium is the amount above the spot price that investors pay for physical coins, bars or jewelry. Premiums vary based on product scarcity, fabrication costs and dealer margins. MetalSemi Asia uses these terms daily to bring clarity to market coverage.
