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When new precious metals buyers first look at prices, they often notice something confusing: the price on a dealer's website is always higher than the "spot price" quoted on financial sites like Kitco or Bloomberg. That gap is the premium — and understanding it is essential to making smart buying decisions.
What Is Spot Price?
The spot price is the current market price for one troy ounce of gold or silver delivered immediately in the wholesale market. It is set continuously by futures exchanges (primarily the COMEX in New York) and reflects the raw commodity price for unrefined or wholesale metal.
Spot price does not account for the cost of refining raw metal into a finished bar or coin, stamping and assaying, packaging, insurance, dealer overhead, or profit margin. All of those costs are bundled into the premium.
What Is the Premium?
The premium is the amount above spot price you pay for a finished, deliverable precious metals product. It is typically expressed as a dollar amount per ounce or as a percentage of the spot price.
For example: if gold spot is $2,000 per ounce and a 1 oz American Gold Eagle is priced at $2,080, the premium is $80 per ounce, or 4% over spot.
Premiums exist on both the buy side (what you pay) and the sell side (what you receive when you sell back). The difference between the two is the dealer's spread — their gross margin on the transaction.
What Drives Premium Levels?
Premiums are not arbitrary. Several factors push them up or down:
Product Type
Government-minted coins carry higher premiums than privately minted bars because of the cost of die production, quality control, the government's guarantee of weight and purity, and the added liquidity that comes with global recognition. A 1 oz PAMP Suisse gold bar will typically be cheaper per ounce than a 1 oz American Gold Eagle, even though both contain the same amount of gold.
Product Size
Smaller products cost more per ounce than larger ones. A 1/10 oz gold coin might carry a premium of 12%–18% over spot, while a 10 oz gold bar may carry only 1%–2%. The overhead costs of production, handling, and shipping are spread over fewer ounces in smaller products, driving up the per-ounce cost.
Market Conditions and Demand
When investor demand surges — during financial crises, geopolitical events, or periods of high inflation anxiety — premiums spike. During the COVID-19 pandemic in 2020, silver premiums on 1 oz coins jumped from their typical 10%–15% to 30%–50% as supply chains were disrupted and retail demand exploded. Spot price alone does not tell the full story during these periods.
Metal
Silver premiums are consistently higher as a percentage of spot price than gold premiums. A typical 1 oz silver coin might carry a 15%–25% premium over spot, while a comparable gold coin carries 3%–6%. This is partly because silver is lower value per ounce (so fixed production costs represent a larger share), and partly because the silver market is smaller and less liquid than the gold market.
Payment Method
Most dealers charge higher prices for credit card purchases (typically 3%–4% more) versus check, wire transfer, or ACH. This is because dealers pay interchange fees to card networks and choose not to absorb that cost. Paying by check or wire is the most cost-effective option at most dealers.
Typical Premium Ranges by Product
The following ranges are approximate and fluctuate with market conditions, but serve as a useful baseline:
- 1 oz gold bars (PAMP, Valcambi, Perth Mint): 1.5%–3% over spot
- 10 oz gold bars: 1%–2% over spot
- 1 kg gold bars: Under 1% over spot
- 1 oz American Gold Eagle: 3%–6% over spot
- 1 oz Canadian Gold Maple Leaf: 2.5%–5% over spot
- 1/10 oz gold fractional coins: 10%–18% over spot
- 1 oz silver rounds (generic): 8%–15% over spot
- 1 oz American Silver Eagle: 15%–25% over spot
- 100 oz silver bars: 5%–10% over spot
How Premiums Affect Your Return
The premium you pay at purchase is a cost you must recoup before you see any real gain. If you pay 5% over spot for a gold coin and then sell back to a dealer at 1% below spot, the metal's price must rise approximately 6% before you break even in dollar terms.
This is why investors who plan to hold for only a short time should be especially conscious of premiums. Long-term holders can afford to pay higher premiums on more liquid products because the premium becomes a smaller percentage of total appreciation over many years.
Secondary Market: Buying at Lower Premiums
One way to reduce premiums is to buy from the secondary market — other investors selling their holdings rather than a primary dealer. Platforms like eBay (look for completed sales to gauge realistic prices), online precious metals forums, and local coin shows can offer opportunities to buy standard bullion products at premiums below what primary dealers charge.
The tradeoff is authentication risk: when you buy from an unknown private seller, you cannot always verify the product's authenticity without testing it yourself. For large purchases, this risk may outweigh the premium savings.
The bottom line on premiums: Always compare prices across at least two or three reputable dealers before buying. A few percentage points of premium difference can add up to hundreds of dollars on a meaningful purchase. Shop on the product, not just the metal.
Premiums When You Sell
Remember that premiums work in reverse when you sell. Dealers will buy back your metals at below spot price — the gap between their buy and sell prices is their margin. Highly liquid products (American Eagles, Maple Leafs, name-brand bars) get better buyback prices than generic rounds or obscure private mint products, which is another reason to stick to mainstream bullion when building a position.
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