Understanding Gold Bullion Pricing
When reading up on gold, you will have come across the terms “Spot-price, premiums bid and ask prices. If you are not a veteran in the market, you might not be familiar with the jargon. So, what is a premium? This is an industry term for mark-up. The premium of the spot price for gold simply means the mark-up per pounce. If for instance, the yellow metal if gold bullion trades at $2,000 an ounce on but the Gold bar or con you want to sell is retailing at $2020, then the premium price is $20.
The mark up is the price that covers the profit for the gold dealer. It also factors the cost of electricity, equipment, manufacturing and the profit margin the gold dealer expects to make to facilitate the process.
Gold products that carry low premiums include rounds and bars, coins carry a higher premium price.
Who sets the price?
The gold price is set by the London Bullion Market Association. It is based on a theoretical and provisional and theoretical gold mining contracts and futures. This means that the price of gold is driven up and down by demand. There is a lot of speculation by gold miners and raw gold dealers to gauge what the current demand will be in relation to the future.
Some gold bullion products have unique qualities that can increase the price of gold. The resale price is affected by the process of minting that takes place at various mints. For instance, a popular mint might produce short-runs of a particular coin.
The precious metals market frequently uses a decades-old system of importers, auctions, and bidding to conduct business. This raises the premium amount overall as well. An American Gold Eagle coin is available for purchase on several websites at varying costs. There is no predetermined premium; instead, each dealer sets their own based on the terms that the gold dealer was able to negotiate. There’s no fixed premium for each item; instead, it all relies on overhead and the deals a specific dealer was able to strike when the goods was bought is another important factor in the dealer world. If they bought it at a premium and the market declines, they will have to charge a large markup to cover their losses. This is perceived by many as price gouging, but to be fair, this is the one thing that can help dealers keep their businesses afloat.
In Conclusion
The list of variables in regard to a markup is enormous it stretches from mining, refining, minting, logistics, efficiency and volume, to logistics, to bidding, to the dealer and the customer. At face value, the industry has one of the lowest profit margins than any other industry. There is no way of knowing whether you are paying the best price or a high premium. You can only do this with experience which comes with how many deep you go hunting for the best price. Shop around, whether you are buying or selling gold bullion. Gold dealers can make the most of it if they buy in bulk.
