Spot vs Futures Price
What the spot price means for you
The spot price reflects what you’d pay or receive today if you were to buy or sell a commodity, with immediate settlement. That’s the core difference between spot and futures pricing: spot is for delivery right now, futures are for later (and the price gap comes down to what it will cost or be worth to hold until then).
If you check gold prices, the spot quote is what dealers reference when quoting for immediate trades, with their commission added on top. And be aware, spot quotes move frequently as new trades are completed on live markets.
How futures prices are set
A futures price is what you agree to pay or receive now, for a fixed quantity of a commodity, but for delivery at a date you pick in the future. These contracts are standardized and traded on exchanges. Futures prices build in the market’s guess at what the commodity could be worth on that future date, plus an adjustment for storage and the interest cost of tying up your funds. For contract mechanics, our commodity futures guide may help.
The cost of carry and the price difference
The spot-futures gap is called the cost of carry. If you held a commodity in storage until a future deadline, you’d have to pay interest on the capital, rent warehouse space, and insure your stock. These costs get added to the futures price, which explains why futures are usually pricier than spot.
There’s another side: sometimes it’s valuable to have the commodity secured upfront (say, your factory can keep producing even if there’s a sudden shortage). That extra value is called the convenience yield and it can bring the futures price below spot. How futures prices line up across months or years is covered in our contango and backwardation article.
Quick example: how to read a futures quote
If the spot price of a metal is 100 units and a contract for delivery three months from now sits at 102, you can break down the difference. Perhaps financing will run 1 unit over that period and storage another 1 unit; together, they explain the two-point gap (no convenience yield in this case).
Should the three-month futures be only 98 instead, that points to outsize value in holding the commodity now, supply might be tight. These numbers are just for illustration, they do not reflect any real market pricing.
Frequently asked questions
Why do news outlets use futures prices as a spot quote?
Usually, major headlines reference the price of the front-month futures contract (for example, Brent crude), since it’s the next to expire and sees heavy trading. That makes it easy to quote, but it’s not identical to the actual spot price for immediate settlement. Double-check which figure the source is using before you compare prices.
Could the spot price ever be higher than the futures price?
Yes, it can. The futures price is commonly above spot when storage and interest costs are significant, but it may fall below spot if there’s scarcity and people want the commodity right away. Commodity market prices can swing sharply, and there’s real risk of loss if you deal in futures or similar trading products. Always consult your financial regulator’s official register before working with a provider.