Spot Gold Contracts: Comprehensive Analysis of the Saudi Market

The term 'spot gold contracts' refers to agreements under which gold is bought or sold based on the prevailing market price at the moment of agreement, with both parties committed to settling the transaction and delivering the gold or its monetary value within a short period, usually not exceeding two business days. This price is known as the 'spot price,' reflecting the current value of an ounce of gold, unlike futures contracts that set the price and delivery at a later date. In the Saudi context, spot gold trading is influenced by global factors, with local price determination based on international indicators such as XAU/USD. Despite the absence of a local exchange specialized in spot gold trading, banks and gold traders provide daily prices based on the global market, with immediate sales of bullion and jewelry at the spot gold price plus profit margins and local fees. From a legal perspective, spot gold contracts comply with Islamic Sharia requirements, as they necessitate actual quick delivery or immediate value transfer, making this type of trading acceptable to Islamic financial institutions in the Kingdom. Spot gold holds particular significance as an investment tool that allows investors to preserve the value of their money against inflation and economic fluctuations, while psychological factors and confidence play a crucial role in driving demand for the precious metal. Understanding spot gold contracts is essential for anyone looking to benefit from the mechanisms of the local and global market, especially as the range of financial products offered by banks and brokerage firms expands for individual and institutional investors.

Spot gold prices experienced notable fluctuations during 2024 and 2025, driven by several global factors, most notably inflation rates, central bank monetary policies, and geopolitical disruptions. In mid-2024, the price of gold reached a record high, exceeding $2,100 per ounce, the highest level in over a decade, before stabilizing in early 2025 within the range of $1,900–$2,000 per ounce. These movements reflect the global demand for gold as a safe haven, especially as Asian central banks continue to bolster their reserves of the yellow metal. In Saudi Arabia, local prices are directly dependent on the dollar-to-Saudi riyal exchange rate, with the spot price per ounce around 7,500 riyals at an exchange rate of 3.75 riyals to the dollar and a global price close to $2,000 per ounce. Local banks, such as the National Commercial Bank and Al Rajhi Bank, continue to publish daily buying and selling prices for gold based on the global spot price. According to estimates from the World Gold Council, demand for gold in 2024–2025 remained high, driven by investment, official reserves, and jewelry. Although there are no precise official data on trading volumes in the Kingdom, estimates suggest that jewelry and bullion sales increase annually with price fluctuations. It is noteworthy that Saudi Arabia's official gold reserves have not recently announced changes, but they were previously estimated at around 323 tons, providing additional support for the global spot gold price. Overall, this data reflects market dynamics and underscores the importance of monitoring global indicators to assess local price trends and prudent financial planning.

Spot gold trading in the Kingdom of Saudi Arabia occurs through multiple channels, given the absence of a specialized local exchange for spot gold contracts within the 'Tadawul' stock market. The mechanisms for buying and selling are summarized in three main ways: First, direct purchases from jewelry stores and authorized gold traders, where the daily price is determined based on the global spot price plus manufacturing margins and local taxes. Second, some Saudi banks offer the option to open gold deposit accounts, allowing customers to purchase gold ounces or fractions electronically, with the possibility of selling later at live spot prices. Third, investors can deal with licensed international or local brokerage firms to invest in financial products linked to the spot gold price, such as Contracts for Difference (CFDs), which reflect the global price moment by moment. In all cases, pricing is based on global indicators such as LBMA and COMEX, while the value of gold in Saudi riyals is calculated according to the prevailing exchange rate. From a legal standpoint, most spot banking products comply with the requirement for actual delivery or immediate cash transfer, making them compatible with Islamic teachings. Investors should ensure they understand the terms and conditions of each product, especially regarding fees, profit margins, and final settlement methods. Understanding the trading mechanism and its costs is essential to avoid risks associated with pricing or liquidity, and it is always recommended to verify the licenses of service providers to ensure the protection of investors' rights.

Spot gold trading holds particular importance within the Islamic financial system, as Islamic law imposes precise conditions to ensure the validity of transactions and avoid legal pitfalls such as usury or uncertainty. In the context of spot gold contracts, most scholars require that actual delivery of gold or immediate transfer of its monetary value occurs either immediately or within a very short period (usually two business days) for the transaction to be legally permissible. This condition distinguishes spot contracts from futures contracts, which rely on delivery at a future date and may sometimes involve speculative elements or interest that are not permissible under Sharia. In Saudi Arabia, Islamic banks and financial institutions are committed to providing products that comply with these standards, such as purchasing bullion or jewelry with immediate delivery or opening gold deposit accounts that track the global spot price with immediate value settlement. Recently, new investment products have emerged offering Sharia-compliant CFDs, where settlements are conducted daily without charging interest or financing fees. On the other hand, spot gold transactions must ensure that buying and selling occur for cash or its equivalent and do not involve excessive leverage or high-risk financial instruments. Therefore, investors should ensure that the products and services they use comply with Sharia regulations and consult Sharia bodies or specialized advisors before engaging in any transaction. These considerations reflect the Saudi market's commitment to enhancing transparency and protecting investors while adhering to religious and social values.

The price of spot gold contracts is linked to several interrelated factors that directly and indirectly affect its value in global and local markets. First, global geopolitical and economic events play a pivotal role, as rising tensions or financial crises lead to increased demand for gold as a safe haven. For example, 2024 witnessed a significant rise in gold prices due to escalating conflicts in certain regions and rising inflation rates in major economies. Second, the monetary policies of central banks, especially the U.S. Federal Reserve, influence gold prices by raising or lowering interest rates, as gold has an inverse relationship with the U.S. dollar; when the dollar weakens, gold prices rise, and vice versa. Third, industrial demand and demand for jewelry, particularly in major markets like India and China, contribute to price movements, although its impact remains limited compared to investment and official reserves. Fourth, changes in central bank gold reserves lead to price fluctuations, as bulk purchases by major countries drive the spot price higher. Fifth, liquidity, production, and refining rates play a role in determining price; increased supply leads to lower prices if not met with sufficient demand. Finally, psychological factors and investor expectations influence price movements, as news and rumors can prompt investors to buy or sell quickly. Understanding these factors is essential for anyone dealing with spot gold, as they help evaluate risks and determine the right timing to enter or exit the market.

The precious metals sector is one of the most dynamic sectors globally, with gold leading in terms of market value, liquidity, and ease of trading. Alongside gold, the list of precious metals includes silver, platinum, and palladium, each with its unique investment and industrial characteristics. In the spot gold market, the yellow metal competes directly with silver, as seen in the XAU/XAG currency pair that reflects the price ratio between them. Silver is used in industrial applications in addition to being a store of value, while platinum and palladium are primarily used in manufacturing industries such as automotive and electronics. On the other hand, precious metals face competition from alternative assets such as cryptocurrencies (Bitcoin), which some refer to as 'digital gold,' as well as government bonds and strong currencies like the dollar and yen. Regionally, the Saudi market does not provide a specialized exchange for precious metals, but national mining companies like Ma'aden play a role in gold production and sector development locally. In contrast, international and regional exchanges such as the Dubai Gold and Commodities Exchange (DGCX) emerge as key venues for spot gold trading in the region, launching Sharia-compliant contracts to attract Gulf investors. The sector's dynamism reflects the importance of diversification and expansion in financial products, focusing on compliance with Sharia regulations and meeting the needs of local and global investors.

Although spot gold contracts are considered a financial commodity and not an investment tool directly linked to a listed company, there are Saudi companies operating in the mining sector that have an indirect relationship with the spot gold market. The most prominent of these companies is the Saudi Arabian Mining Company (Ma'aden), which is the main gold producer in the Kingdom and operates several mines such as the Ad Duwayhi mine. The performance of gold-producing companies is reflected in the spot gold prices through their impact on revenues and operating profits, as rising spot prices lead to increased returns for companies if production costs remain stable. On the other hand, the Saudi stock market 'Tadawul' does not provide direct products for spot gold contracts, but investors can purchase shares of mining companies or investment funds that invest in gold or international mining companies. It is important to distinguish between investing in spot gold (owning the metal itself) and investing in shares of mining companies (owning a stake in a company affected by various factors, including the spot gold price and operational efficiency). Although the mining sector is linked to gold, the stock prices of companies like Ma'aden do not necessarily move at the same pace as spot gold prices, as they are influenced by additional factors such as company production, operational policies, and extraction costs. Therefore, investors should study the differences between direct investment in gold as a commodity and investing in mining company stocks before making any financial decisions.

Although gold is considered a relatively safe haven compared to other assets, trading spot gold contracts involves a range of risks that investors must consider. First, price volatility: gold can experience sharp fluctuations due to sudden changes in monetary policies or geopolitical events, which may lead to unexpected losses when buying at a high price and selling at a lower price. Second, trading costs: this includes the profit margin added by local traders, as well as manufacturing fees and taxes (such as VAT on jewelry), which may reduce the investor's net return. Third, liquidity risks: in some cases, an investor may find it difficult to sell large quantities of physical gold quickly without incurring margin losses or waiting longer. Fourth, storage risks: holding physical gold requires adequate insurance against theft or damage, adding additional costs and exposing the investor to security risks. Fifth, regulatory risks: laws or regulations regarding gold trading or its import and export may change, affecting market movements and increasing uncertainty. Sixth, fraud risks: caution must be exercised when dealing with unlicensed entities or unclear investment products, as some fraudulent or misleading offers circulate in the market. Therefore, it is essential to evaluate all risks associated with trading spot gold and ensure dealing with reputable institutions while following effective risk management strategies.

The Saudi market offers investors several alternative methods for investing in gold alongside spot trading, providing greater flexibility in diversifying investment portfolios and managing risks. First, exchange-traded funds (ETFs) linked to gold, such as the SPDR Gold Shares, which reflect the spot price movements of gold and can be purchased through international brokers. Although Saudi interest in these is relatively limited due to regulatory constraints, they provide an effective way to invest indirectly in gold without the need to hold the metal itself. Second, investing in shares of mining companies, where the Saudi stock market allows purchasing shares of companies like Ma'aden, which are partially affected by movements in the spot gold price. Third, purchasing jewelry and bullion, the most popular option among individuals, where physical gold can be bought from authorized stores and held as savings or a long-term investment. Fourth, gold bank accounts, where some Saudi banks offer the option to open gold deposit accounts that allow clients to buy and sell gold electronically based on the global spot price. Fifth, official gold coins issued by some government entities sold at prices close to the spot price. Each method carries advantages and disadvantages regarding liquidity, costs, risks, and flexibility, and investors should carefully study the available options and choose the most suitable for their financial needs and goals.

The spot gold market witnessed several significant developments during 2024 and 2025 at both global and regional levels. In mid-2024, gold reached its highest level in 13 years, surpassing $2,179 per ounce, driven by economic fears and geopolitical tensions. This was followed by a wave of volatility coinciding with inflation data releases and central bank decisions worldwide. Regionally, central banks in the Middle East and Asia continued to purchase large quantities of gold to bolster their reserves, enhancing the status of spot gold as a safe haven and positively impacting global prices. In October 2025, the Dubai Gold and Commodities Exchange launched the first Sharia-compliant silver spot contract, paving the way for similar spot gold contracts aimed at attracting Gulf investors seeking Sharia-compliant products. In Saudi Arabia, activity has been limited to updates in banking products and increases in VAT on jewelry, without direct interventions in determining gold prices or new government investment policies. Gold prices in the Kingdom remain linked to the global market and the dollar-to-riyal exchange rate, with continuous monitoring of any potential changes in monetary or investment policies that may affect the local market. These developments reflect the importance of following global and regional news when assessing investment opportunities and challenges in spot gold.

Monitoring global indicators and exchange rates is a fundamental step when trading spot gold contracts, as local prices in the Kingdom of Saudi Arabia primarily depend on international variables. Indicators such as the LBMA Gold Price (London Bullion Market Association) and COMEX (New York Mercantile Exchange) determine the global spot price of gold and are used as a basis for pricing bullion and jewelry in local markets. Furthermore, the exchange rate of the U.S. dollar against the Saudi riyal directly affects the value of gold in riyals, as the global spot price per ounce is calculated and converted to local currency based on the prevailing exchange rate. For example, at a price of $2,000 per ounce and an exchange rate of 3.75 riyals to the dollar, the price per ounce is approximately 7,500 riyals. The value of gold changes instantly with any movement in the global price of gold or the dollar, requiring constant monitoring of indicators and currency prices. Additionally, platforms like Investing.com provide real-time spot gold contract prices, allowing investors to access live market data before making buying or selling decisions. Following these indicators contributes to improving trading decisions, managing risks, and determining the optimal timing for entering or exiting the market, with attention to the impact of seasonal factors and global events on price movements.

Spot gold plays a vital role in the Saudi economy, both in terms of official reserves and as a popular investment tool among individuals and institutions. First, the Kingdom relies on gold as part of its foreign reserves, which amounted to approximately 323 tons according to World Gold Council data for 2020, with the potential for increases amid recent investment trends by central banks. Second, gold is an effective means of hedging against inflation and currency fluctuations, prompting individuals and companies to increase their holdings of physical gold or invest in financial products linked to the spot price. Third, the spot gold price impacts the prices of jewelry and bullion in the local market, as the value of the metal in Saudi riyals is directly tied to the movements of global indicators and the dollar exchange rate. Fourth, rising or falling spot gold prices affect the performance of certain economic sectors, such as mining (companies like Ma'aden) and retail (jewelry stores). Fifth, gold trade contributes to generating additional revenues for the national economy through exports or re-exports, especially with the increasing regional demand for high-quality Saudi gold. Sixth, investments in spot gold provide an additional dimension for diversifying the economy and reducing dependence on oil, aligning with the objectives of Saudi Vision 2030. Overall, spot gold reflects the interplay of financial, economic, and psychological factors in shaping the investment and economic policy of the Kingdom.

Investing in spot gold contracts carries a set of advantages that make it an attractive option for many investors, alongside some disadvantages that should be approached with caution. Among the most notable advantages: First, ease of access and liquidity, as spot gold can be bought or sold quickly based on global prices. Second, transparency, as prices are calculated according to well-known global indicators and are reflected immediately in the local market. Third, Sharia compliance, as spot contracts allow for quick and direct settlement without entering into legal issues related to interest or speculation. Fourth, gold's ability to retain value over the long term makes it an effective tool for hedging against inflation and economic crises. As for the disadvantages, they include: First, price volatility, where investors may incur losses when gold prices drop after purchase. Second, high costs, especially when buying bullion or jewelry that includes manufacturing fees and profit margins for traders. Third, storage risks, as physical gold requires proper insurance and storage. Fourth, limited products in the local market, as there are currently no local electronic trading platforms for spot contracts. Fifth, liquidity risks in some cases, especially when wishing to liquidate large quantities without losses. Therefore, investors should carefully study the advantages and disadvantages of investing in spot gold and determine its suitability for their financial goals and risk tolerance.

When dealing with spot gold contracts, there are a set of general guidelines that investors should follow to enhance their chances of success and reduce risks. First, continuously monitor global indicators and exchange rates, as local prices are directly affected by international variables. Second, ensure dealing with licensed and reputable entities, whether in purchasing physical gold or investing in financial products linked to the spot price, to avoid risks of fraud or illegal products. Third, carefully study the terms and conditions of investment products, especially regarding fees, costs, settlement methods, and withdrawal and deposit policies. Fourth, understand the risks associated with price volatility and establish a clear risk management strategy, such as determining investment ratios and not allocating all capital to gold alone. Fifth, ensure the Sharia compliance of investment products, especially when using derivative products or CFDs. Sixth, plan adequately for storing physical gold if chosen as an investment method, ensuring security and liquidity. Finally, it is always recommended to consult a licensed financial advisor before making any investment decision, given the complexity of the gold market and the interplay of influencing factors, with the necessity of updating information and continuously monitoring market developments.