What characterizes spot markets?

Spot markets are characterized by the immediate delivery of commodities. In these markets, transactions are settled "on the spot," meaning that the buyer purchases a commodity for immediate delivery and payment. This immediacy contrasts with other market types, such as futures markets, where contracts are for delivery at a later date.

For instance, when someone buys gold in a spot market, they are acquiring it for current possession rather than entering into a contract for future delivery. This is essential for traders focused on taking advantage of price movements in the short term. Spot markets primarily deal with actual physical commodities or financial instruments at their current market prices, emphasizing liquidity and the quick exchange of goods or assets.