When you buy gold products the base price will always be dictated by the spot price. This price changes constantly throughout the day so any quote you get should be based on the live spot price for that day. Since precious metals are traded 24 hours around the world on week days, the spot price will always be live and the same around the world. In January 2019, the spot price for an ounce of gold was $1,250 however, since then the price has climbed as high as $1,715 an ounce and it shows no signs of dropping in the near future.
When you buy gold from a gold dealer, you can expect to have a premium factored into the final price offer. The spot price is still relevant as big a factor for bullion products as it is for gold jewellery and other scrap gold. These premiums will vary from gold dealer to dealer and even mint to mint which is why it is always a good idea to shop around before settling on one offer.
The size of the gold bar matters. The average person would imagine a gold bar to be brick size. That has a lot to do with the images that the gold industry and the media put out there, but the truth is that there are gold bars as small as 0.5 grams. Mints produce different sized gold bars ranging from as little as 0.5 grams to 1 kilogram. The largest gold bar in the world happens to weigh 250 kilograms. Large institutions like banks, the jewellers and companies that use gold to manufacture their products buy gold in bulk and they most likely by 400oz sized bars. This is the “standard” weight for “Good Delivery” bars that meet the purity and quality requirements of the London Bullion Market Association. Small, Individual investors may find 400oz gold bars impractical. Not only are they very heavy but they can be hard to sell. For instance, when you need to liquidate you will need to sell the entire 400oz of gold in one go which is not easy when you need quick cash. A gold bullion bar that size is not ideal when you don’t want a large amount of money in one go. It is for this reason that mints produce gold bullion bars as small as 1oz. It is better to have 1oz, 10oz or 50oz gold bars that stack up to 400oz than to have one large 400oz bar.
So, what is a gold bar premium?
The gold bar premium is derived from the production costs the cost of storage as well as the overhead costs of the refinery or mint that produces the bullion bar including the mark up a dealer would put to make a profit. Premiums can be a set amount of money over spot price or a certain percentage over spot. Most 1oz gold bullion products commonly have a set monetary cost over spot.
So, what should you expect in terms of pricing?
Small gold bullion bars have higher premiums attached than larger ones. This is because they go through the same minting process as large sized bars but they have less gold. This means it costs the refinery the same amount of money to produce a 1ounce bar as it does to make a 10oz gold bullion bar but the refinery.