Bid, Ask and Premium: What You Really Pay for Bullion

The spot price is the current market price for one troy ounce of a metal traded in large wholesale amounts. It's a reference number, and it moves all day while markets are open. If you want the details on where it comes from, see What Is the Spot Price of Gold, and How Is It Set?.

The ask (or "offer") is the price a dealer will sell to you at. The bid is the price the dealer will pay to buy from you. For physical bullion, the ask is almost always above spot, and the bid is usually close to spot, sometimes a little above or below depending on the product and market conditions.

The gap between bid and ask is called the spread. You can think of it as what it costs to buy something and then immediately sell it back.

Bullion means metal valued mainly for its weight and purity, such as standard gold and silver coins, bars and rounds. That's different from numismatic (collectible) coins, whose price depends on rarity and condition. The bullion premium is the amount you pay above the melt value of the metal inside the product.

It exists because turning raw metal into a coin or bar you can hold costs money. Typical parts of the premium include:

None of this is a hidden fee. It's simply the price of physical metal as opposed to a number on a screen. What matters is knowing how big it is and comparing it across options.

Premiums vary a lot from product to product. Rather than quoting figures, which change constantly, here are the general patterns you'll tend to see:

A few of these are worth explaining.

Dealers show prices in different ways: some per coin, some as "spot + $X", some as a percentage over spot. The simplest way to compare is to turn every offer into a total cost per troy ounce. (A troy ounce is 31.1035 grams, a little heavier than the everyday ounce. See Troy Ounces Explained if that's new to you.)

Here's a simple illustration with made-up round numbers, not real prices: say spot is $100 per ounce and a dealer's ask for a 1 oz coin is $106, plus $4 of shipping spread over your order. Your all-in cost is $110, so your effective premium is $10, or 10% over spot. If that dealer's bid on the same coin is $101, then selling right away would get you $101 back, leaving you $9 short of your $110 cost. The price would have to move that much in your favour just to break even.

Most first-time buyers focus only on the purchase price. But at some point you'll probably sell, or your heirs will, and the bid determines what you actually get back.

A few things to keep in mind:

If you're weighing collectible coins against plain bullion, the pricing logic is quite different. The Rare Coin vs Bullion dealer notes go into that comparison.

A dealer who is vague about buyback prices or pushes one "special" product hard deserves extra caution. High-pressure sales tactics, especially for collectible or proof coins sold as investments, are a common warning sign.