What is the spot market?
The spot market is a market where an asset is bought or sold for immediate delivery, and the spot price is the price agreed for that immediate deal.
"Immediate" means delivery and payment happen within the standard short settlement period for that market, not at a date chosen in the future. Currencies, metals, energy and other commodities all have spot markets.
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Spot price meaning: the formal definition
For experienced readers, the precise version is this. A spot transaction settles on the spot date, which is the market's standard settlement date for that asset. In interbank forex, the spot date is a fixed small number of business days after the trade date, and it depends on the currency pair and on bank holidays in both currencies. Any deal that settles later than the spot date is a forward. See forward contract.
The spot price is therefore the price for delivery on the spot date. Prices for later dates are derived from it. In forex, the forward price is the spot price plus or minus forward points, which reflect the interest rate difference between the currencies. The logic behind this is covered interest parity.
Worked example (hypothetical)
A hypothetical importer in Karachi needs US dollars now to pay a supplier.
- The bank quotes a spot USD/PKR rate as a bid and an offer.
- The importer accepts the offer price.
- The dollars and rupees change hands on the spot date at that rate.
If the importer needs dollars in a few months instead, the bank quotes a forward rate. That rate is the same spot rate adjusted by forward points, so it is a different number.
Where you see the term
- Trading platforms. Instruments such as XAUUSD or EUR/USD on MetaTrader are often described as "spot" because their prices follow the spot market. A CFD (contract for difference) on a spot price is not delivered. The position stays open from day to day, and the broker charges or credits an overnight swap. See swap fees and cash vs physical settlement.
- News and reports. Headlines like "spot gold rose" or "spot oil fell" refer to the immediate-delivery price. The futures price for the front month is usually quoted next to it.
- Bank and central bank data. Published exchange rates are mostly spot rates.
Edge cases
- Spot vs futures in commodities. When futures trade above spot, the market is in contango. When they trade below spot, it is in backwardation.
- No single spot price. Spot forex and spot gold trade over the counter, so each dealer quotes its own bid and ask. Small differences between sources are normal.
- Settlement still takes time. "Immediate" does not mean instant. Clearing and settlement processes apply. See clearing and settlement.
Trading leveraged CFDs on spot prices can lose money fast. Leverage multiplies losses in the same way it multiplies gains. For more, read risk management.
Related terms
Frequent questions
What is the spot market in simple words?
It is the market where you buy or sell something for immediate delivery at today's price.
Is the spot price the same as the market price?
In everyday use, yes. Formally, "market price" can also refer to futures or forward prices. The spot price refers only to delivery on the spot date.
Is spot gold on a trading platform physical gold?
No. A spot gold CFD tracks the spot price but involves no delivery of metal. Positions held overnight are subject to swap.
How does the spot price differ from the forward price?
The forward price is for delivery at a later date. It is calculated from the spot price adjusted for the interest rate difference or for holding costs.