Understanding Premium Over Spot

What is Premium Over Spot?

“Spot price” is the market price of a Precious Metal at any given moment, listed as a price per ounce. It can fluctuate on a minute-to-minute basis, like any commodity traded on the market. “Premium” is simply the additional cost of any Precious Metal above the spot price. So, if the Gold spot price is $1174.60 per ounce, anything above that number reflects the cost of doing business, such as production and distribution. Additionally, there may be a considerable premium over Gold spot price or Silver spot price for special items such as jewelry, antiques, collectibles or coins with great numismatic value. Plainly put, premium plus the spot price is the price you will actually pay for any Precious Metal product.

Understanding premium over spot is equally important for investors and collectors. Investors naturally want to purchase items as close to Silver spot price or Gold spot price as possible. However, collectors must be aware of the spot price of Gold and the spot price of Silver as well. It is imperative for a numismatist, or any art collector, to understand exactly how much of the purchase price of a collectible item is going to the subjective value over the raw materials. Knowing the Silver spot price and the Gold spot price allows the discerning collector to value the art separately from the value of the medium.

Spot Price Gold

Say you are an investor looking to diversify into Gold bullion. Buying Gold at spot price may be ideal, but it is highly unlikely. It is difficult to buy exactly at Gold spot price, because even the honest and reputable Precious Metals dealers have to cover overhead costs. Gold spot prices show what a dealer is paying on the open market, so there will be a modest mark-up. However, if you follow Gold spot prices, you can assure yourself the company is using fair business practices. It is normal to pay something over the spot price of Gold, but a wise buyer armed with information can make the best decision.

Gold spot fluctuates moment to moment, of course, so if you are considering a large purchase, watch the spot price of Gold carefully. A well-timed move could save you big. It’s easy to follow Gold spot on any reputable website like APMEX. 

Spot Price Silver

Purchasing coins or bullion exactly at Silver spot price is as unlikely as buying  Gold at spot, but a smart buyer can get Silver much closer to spot Silver price than with other Precious Metals. For the simple reason that Silver spot prices are lower, the premium over spot will be low as well.  This overall low cost including the premium over Silver spot price makes Silver an ideal entry into Precious Metals investing.  For example, you may buy a 1 oz Silver bar for as little as $0.79 per ounce over spot — far less than the cup of coffee many people buy on the way to work every day. That may be an excellent value and a great way to minimize your premium over spot cost.

Paying attention to Silver spot cost can add up if you wish to make a large purchase, too. Just as with the spot price of Gold, watching for small fluctuations in the Silver spot price makes sense if you wish to make a considerable addition to your Silver investment portfolio. 

With a commitment to following the Silver spot price and the Gold spot price, a firm understanding of premium over spot prepares even a new investor to make savvy choices and smart buys.

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