2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The English word "Spot" literally means "place". Therefore, "in Spot" means "on the spot", and the spot market is where instant transactions are made. It is logical to assume that they are selling goods in this place, the properties and characteristics of which are well known. This product must be standardized in any part of the world. Logic did not fail you - the spot market trades currencies, precious metals, stones, grains, meat, gas, oil and other "essential" commodities.
Market participants
Of course, each of them is grouped in a certain place. Various financial exchanges are used to sell and exchange national currencies. Bidding participants:
- Traders are traders who earn by selling and exchanging currencies, acting in their own interests.
- Brokers are people working "on behalf of and on behalf", making transactions in the interests of third parties.
Do everything on time
According to the terms of payment and fixing the exchange rate involved in the sale and purchase, transactions are divided into three groups:
- Pay on the same day (TOD fromEnglish today - today).
- Pay the next day (TOM - tomorrow).
- One day after the deal.
From theory to practice
The spot gold market, compared to the currency and securities market, is less dynamic, but more reliable, so the price of gold is not so high, but at least stable. Currency jumps are explained by the fact that national currencies and corporate shares are more susceptible to political conditions.
Let's take an example. Now there is a situation with the US government debt. The possibility of a technical default caused the spot market to instantly react with a drop in demand and the price of US Federal Reserve Treasury bonds, but gold is always valuable. In addition, not all bidders in this area work with speculative goals (buy goods at a lower price in order to sell more expensive after a while). Many players enter into contracts for the needs of production (medicine, electronics, jewelry industry).
Natural gas is mostly sold on the forward market (where contracts are signed today and goods are delivered in the future), the spot gas market is small in volume. Transactions here are resorted to on the principle of “intercepting for a while”. Prices due to shutdowns in North Sea gas production are approaching prices for Gazprom's products sold under futures contracts. This will lead to an increase in sales of Russian gas in Europe.
For purchasesproducts (grain, meat, sugar) are mostly used forward exchanges (here you can conclude a contract for the supply of wheat, which has not yet grown). A spot market for those who miscalculated their needs or failed to hold stock.
One of the most affected by market conditions is the production of the metallurgical industry. The Metalsea index (for its calculation, the arithmetic average of a certain list of products of three price categories is taken: from 1 ton, from 5 tons, from 20 tons, divided by 100) for several months weekly either increased or fell. The recent events in Syria and the related reaction of world leaders caused negative dynamics in the spot markets.
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