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Whether you plan on buying one gold coin or an entire vault, it’s important to understand certain bullion terminology. This will help you make more informed purchase decisions. Learning as much about precious metals as possible is ideal, but if you start anywhere, it should be with gold premiums.
Even if this term isn’t familiar to you, you’ve certainly encountered it if you’ve purchased gold coins. Perhaps you saw the spot price of gold hovering around $2,000, but dealers were charging about $2,090 for a 1-ounce gold coin. What’s the explanation for this difference?
That variation in price is the gold premium. You’ll pay this added cost no matter where you buy gold coins — whether it’s a pawn shop or the largest bullion dealer on earth. Once you understand this additional charge, though, you’ll recognize just how important it is.
The premium on gold coins you see relates to a variety of factors. In fact, premiums can even vary between coins with the same precious metal content. This premium can also fluctuate depending on where you buy an item and even the timing of your purchase.
The gold premium is the added cost that buyers pay for bullion beyond what the underlying precious metal content would call for. This isn’t an arbitrary fee that gold dealers came together and decided upon. In fact, much of the extra money you pay doesn’t even go to the dealer.
Consider what it takes for a gold coin to end up in your safe. It doesn’t just come out of the ground ready for sale. The following are just a few of the processes that occur before you ever get a chance to buy American Gold Eagles and other bullion coins:
Each of these processes cost money, and if folks didn’t get paid, the entire system would shut down. Once a coin reaches a dealer you’re considering buying from, all these costs have already been paid. If the dealer sold at spot price, they would make zero profit.
In fact, any dealer selling at spot price would quickly lose money. This is why you’ll encounter the gold premium no matter where you look. This holds true for coins, bullion bars and other forms of the precious metal.
Many people think they can get around this by purchasing gold items on eBay. While this is a great idea in theory — since you’re often buying from private sellers — they encounter added fees as well. When that combines with high demand, you’ll still pay more than spot.
If you stumbled upon this guide, it might be because you’re looking to buy gold coins at spot price. The previous section has probably led you to believe that this is impossible. In most instances, that’s precisely the case. You’ll rarely find any bullion without a gold premium attached.
Of course, there are some exceptions to the rule. Some precious metal companies will offer small amounts of bullion near spot price in order to gain new customers. At that point, you’re on their email list and will probably receive marketing messages in your inbox for the rest of your life.
Of course, these onetime deals will only get you so much. And since some premiums jumped as high as 10% when demand for gold skyrocketed, it’s unlikely that you’ll be able to find such deals any time soon.
As someone spends more money, the gold premium they pay will reduce. This will never reach “zero” for most folks, but some major bullion dealers can get close when building their inventory. Unless you fall into this category, though, your goal should be to find the lowest premium possible.
You’ve certainly noticed the difference between the spot value of gold and the price consumers pay. If you compare prices between bullion bars and coins, though, you’ll notice a variation in price as well. This is even the case when you’re buying the same weight in precious metal.
To understand this price difference, one need only consider the factors involved in gold premiums. Things like dealer costs, mining and transportation costs may be similar for bars and coins. Unfortunately, that’s about where the similarities end.
It’s a simple fact that gold coinage simply costs more to produce. You’ll see this with any purchase you make. Consider the following prices when the value of gold climbed higher than $1,725:
These price differences can climb even higher if you buy proof or certified versions of bullion coins. Believe it or not, production costs for these items are higher than your typical coin. This makes it clear just how many factors can affect the gold premium you pay.
The moral of this story is that buying gold bullion bars is more affordable than investing in coins. You’ll get higher resale value on coinage, though, so it’s important to consider your investment goals. Regardless of the direction you go, you’re still getting a great bullion investment.
While you’re unlikely to buy gold coins at spot price, there are ways you can reduce the premium you pay. The most important thing is to only buy from reputable dealers. Following this simple step could’ve saved millions of people’s money in the past few decades.
You’re going to encounter offers for low-premium — or even zero-premium — gold coins out there. Unfortunately, many of these offers are nothing more than bullion scams. Never forget the adage that, if it sounds too good to be true, it probably is.
You often can find lower gold premiums, though, when purchasing rounds from private mints. Since these are not legal tender or government-issued, the cost of production is typically not as much. Unfortunately, private mints often deal mostly with silver due to its lower value.
You can also save money on government issues by purchasing higher quantities of bullion. Like most other products in life, buying in bulk nets you a discount. You can see these lower prices on any gold coin product page on the Silver Gold Bull website.
In a perfect world, everyone could invest in gold at the spot price. Unfortunately, this simply isn’t how it works. An extensive amount of work goes into getting gold out of the ground and into your vault. Without these costly processes, we’d have no access to the precious metal at all.
This is why you should always expect to pay a premium on gold coins. And even though these costs are higher for coins than bar bullion, you’ll at least know you’re also getting more value with coinage. Just because you have to pay a gold premium, though, doesn’t mean you should overpay.
That’s why we offer the Best Price Guarantee at Silver Gold Bull. If you find a better price from our competitors, we’ll match that price and offer a better experience. Visit our Gold Bullion Products page today, and you’ll quickly learn that we’re the best value for precious metals.
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