A spot price is the current market price to buy or sell an asset for immediate delivery and settlement. It is the number you see quoted in real time for gold, oil, a currency pair, or a share of stock, and it reflects what buyers and sellers have just agreed the asset is worth right now, with no premium or discount baked in for future delivery. Every other price in the market — a futures contract, a dealer’s retail markup on a bullion coin, a bank’s forward rate — is built on top of it.
How a Spot Price Is Set
Spot prices come from actual completed transactions, not models. On an organized exchange, an electronic matching engine pairs buy and sell orders throughout the trading session, and the most recent matched trade becomes the quoted spot price. Over-the-counter markets work the same way in principle, except prices are negotiated directly between counterparties rather than through a central order book.
Different assets have different reference points. For gold, the widely used benchmark is the LBMA Gold Price, set through a twice-daily electronic auction at 10:30 a.m. and 3:00 p.m. London time, with all business at that auction settling at a single published price per fine troy ounce.1LBMA. Precious Metal Benchmarks Energy and agricultural spot quotes on venues like the CME Group and ICE update continuously during trading hours. Currency spot rates come from a decentralized global network of banks, brokers, and electronic platforms trading around the clock, which is part of why foreign exchange is the largest spot market in the world.
What Moves the Spot Price
Supply and demand drive spot prices more directly than any other variable. A refinery outage that cuts gasoline production, or a mine closure that reduces copper output, pushes the spot price up as buyers compete for scarcer supply. Oversupply forces sellers to accept lower prices to move inventory they cannot economically store. Oil in 2020 was the extreme case: when storage capacity ran out, spot prices collapsed because sellers had nowhere to put the product.
Geopolitical events and economic data releases produce the sharpest short-term swings. Sanctions, conflict, or shipping disruptions choke off supply chains overnight, and traders reprice immediately. Inflation and jobs reports shift expectations about interest rates and future demand, moving commodity and currency spot prices in minutes.2Federal Reserve Bank of St. Louis. Consumer Price Index for All Urban Consumers – All Items in U.S. City Average Investor sentiment amplifies both directions: fear after a policy surprise or a bank failure triggers broad selling, and optimism triggers speculative buying.
Slippage in Fast Markets
One practical consequence of that volatility is slippage — the gap between the price you see when you place an order and the price at which it actually fills. During fast-moving markets, liquidity thins out as market makers widen their quotes or pull back. A large order in a thin market can “walk the book,” filling portions at progressively worse prices as it consumes available liquidity at each level. Slippage hits larger orders harder than small retail trades. If you are trading actively, using limit orders instead of market orders is the simplest way to control it.
Spot Price Versus Futures Price
The relationship between the spot price and futures prices for the same asset tells you what the market expects next. Two terms describe the shape of the futures curve:
- Contango: the futures price is higher than the current spot price, common when storage and financing costs are significant, because buyers accepting future delivery expect to pay for those costs. Oil and agricultural commodities frequently trade in contango.3CME Group. What Is Contango and Backwardation
- Backwardation: the futures price is lower than the spot price, which often signals tight current supply — buyers need the commodity now and pay a premium for immediate delivery.3CME Group. What Is Contango and Backwardation
As a futures contract nears expiration, its price and the spot price converge. If they did not, traders would arbitrage the gap, buying in the cheaper market and selling in the more expensive one until the prices aligned. That convergence keeps futures markets anchored to physical reality and is why the spot price sits at the center of commodity pricing.
Physical ownership also carries costs that paper positions do not: warehousing, insurance, and transportation. These carrying costs are part of why a futures price often sits above the current spot, and they are a real drag on returns for investors holding physical gold or oil rather than an ETF.
How Spot Trades Settle
Settlement is the point at which ownership and payment actually change hands, and the timeline depends on what you traded.
For most U.S. securities — stocks, bonds, and mutual funds through a brokerage — the standard settlement cycle is T+1, one business day after the trade date. The SEC finalized the shift from the previous T+2 cycle, with compliance required as of May 28, 2024.4SEC. SEC Finalizes Rules to Reduce Risks in Clearance and Settlement Under SEC Rule 15c6-1, brokers and dealers generally cannot enter into a securities contract that provides for payment and delivery later than the first business day after the trade date.5Legal Information Institute. 17 CFR 240.15c6-1 – Settlement Cycle
Foreign exchange spot transactions still settle on T+2, two business days after the trade.6Federal Reserve Bank of Chicago. Foreign Exchange Trading and Settlement – Past and Present The longer window reflects the complexity of coordinating payments across currencies, time zones, and banking systems. Physical commodity transactions vary further depending on the logistics of moving the goods.
Settlement carries its own risk: that one party delivers and the other does not. In foreign exchange, the Bank for International Settlements estimated that $2.2 trillion in daily FX turnover was subject to settlement risk as of April 2022, and when a counterparty fails, the exposed party can lose the full principal value of the transaction rather than just a price difference.7Bank for International Settlements. FX Settlement Risk – An Unsettled Issue Trading through a regulated exchange or a broker that uses a central counterparty clearinghouse is the practical protection.
How the IRS Taxes Spot Market Gains
How your profit is taxed depends on what you traded and how long you held it, and the differences are large enough to change which asset you should hold in which account.
Short-term capital gains from assets held one year or less are taxed at ordinary income rates, which for 2026 run from 10% to 37% federally. Long-term gains on most assets held longer than one year qualify for preferential rates of 0%, 15%, or 20%, depending on taxable income.
Physical precious metals are treated worse. The IRS classifies gold, silver, and other bullion as collectibles under Section 408(m) of the Internal Revenue Code, and long-term gains on collectibles face a maximum federal rate of 28% rather than the 20% cap that applies to stocks and most other capital assets.8Legal Information Institute. 26 USC 1 – Tax Imposed The eight-percentage-point gap is one reason some investors prefer gold ETFs, though fund structure affects their own tax treatment.
The Wash Sale Rule Does Not Cover Commodities
Commodity traders get a notable tax advantage. Under IRC Section 1091, the wash sale rule — which blocks you from claiming a loss if you repurchase a substantially identical asset within 30 days — covers only stocks and securities.9Legal Information Institute. 26 USC 1091 – Loss From Wash Sales of Stock or Securities Commodities, futures contracts, and foreign currencies fall outside the restriction. You can sell a gold position at a loss and buy it back the next day without forfeiting the deduction, something a stock trader cannot do.
Broker Reporting
Brokers must file Form 1099-B for sales of most commodities, regulated futures contracts, and securities. Spot sales of agricultural commodities are exempt from mandatory 1099-B reporting, though brokers may report them voluntarily.10IRS. Instructions for Form 1099-B – Proceeds From Broker and Barter Exchange Transactions Whether or not a 1099-B arrives, you are responsible for reporting all gains and losses. Keeping your own records of purchase prices, sale prices, and holding periods is the only reliable way to file accurately.