Spot price vs. Sale price

The spot price, or the price you see in the media for gold and silver, is different from the cost to buy coins and bars. However, the spot price is the basis to determine the price of them. Let’s look at some examples.

Silver Eagles
The most common silver bullion coin is the American Silver Eagle, so we’ll use this for our example on how pricing is determined. For this example, let’s say the current spot price is $35. The production and minting costs average about $2.50 per coin, and the dealer profit is $1.50 to $2 per coin, depending on the number of coins being purchased. In this case, we have $35 + $2.50 + $1.50. This means your price would be $39. This is the ask price.

(Side note: A common amount to buy from a dealer is a 20-coin roll. Buy less than 20 and you’ll pay more per coin, because it’s time-consuming for a dealer to work with small or odd amounts.)

The price you can expect if you were to sell those coins to a dealer like My Gold Advisor would be spot plus about $1 to $1.50 per Silver Eagle. Therefore, you’d receive about $36 to $36.50. This would be the bid price.

Gold Eagles
Gold Eagles are similar, but have smaller margins in most cases. Let’s say the spot price for gold is $1,800 per ounce. The mint and production premium is about 3.5%, and a fair dealer markup is about 3% for one or two coins (larger amounts would generally result in a lower markup by the dealer). Therefore, a fair price to pay would be $1,800 + $63 + $56, or $1,919 per coin.

The price you can expect to receive to sell Gold Eagles to a dealer like My Gold Advisor would be the spot price plus 1% to 2% per Eagle, or $1,818 to $1,836.

Eagles vs. Coins & Bars
The reason we recommend Eagles instead of bars or coins is because of incredibly high liquidity they have. Gold and Silver Eagles are easy to sell anywhere in the world very quickly. They’re well known and trusted.

You’ll pay a little bit more when you buy the Eagles than you would for a bar or coin, but you’ll also get most of that premium back when you sell the Eagles to a dealer or another party.

Any well-known bullion is fine to purchase for your gold and silver portfolio. My personal preference is the Eagle and the Maple Leaf, because of their worldwide recognition and acceptance compared to other, lesser known forms of bullion.

A great choice for you if you’d like a gold bar is the Suisse Pamp, which is very well known, very liquid, and has only a small markup. These are very popular with our clients.

The spot price is what major institutional buyers and bullion banks are paying on commodities exchanges around the world for all sorts of commodities, including gold and silver. These trades are primarily futures contracts and do not involve physical delivery. The spot price is about the futures value. This is the value for delivery of gold or silver in the next 30 days.

When you see oil in the news for $92 a barrel, that’s the spot price. This is the price for a barrel of oil that will be delivered in the next month. Let’s say it’s September now, and we say, “Gold is at $1,690.” That’s the amount the market is saying gold is valued at for delivery in the middle of October.

The Chicago Mercantile Exchange, often called COMEX, is one example of a futures market. It deals in commodities like metals, agriculture, oil, etc.

Bullion is the term for a coin or a bar in an easily recognizable form and using the spot price as the basis for its cost to you. There are millions of bullion coins, which is why the premium on them is small and they can be purchased for only a small amount over the spot price.

Bullion vs. Spot Price
In general, the price you pay for bullion coins and bars is a mixture of the spot price, production cost, and dealer markup. Gold bullion coins are generally 4% to 6% over the spot price. Silver bullion coins are generally 7% to 11% over spot, a bit higher, because the mints charge a higher premium for production.

Fractional Gold
Other less liquid products like the fractional gold one tenth, one fourth, and one half ounce Gold Eagles carry higher premiums, because of the costs associated with minting them.

Figuring Out Today’s Price for Your Gold and Silver
Call your favorite dealer or look up the spot price on the internet. Multiply that times the number of ounces you own. This will provide a fairly good idea of how much your metals are worth.

At My Gold Advisor, you can add 1% to 5% to the spot price to figure out how much your stuff is worth since we pay more than any other dealer in most cases.

Damion Lupo