Spread is the difference between the buy and sell price. Premium is the extra amount over spot price you are paying. Spread is how the dealer makes his money. It’s his profit margin.
As a rule:
– Gold has lower spreads and premiums than Silver. Last year Perth Mint spread on Silver was 10%!
– ETFs have lower spreads and premiums than physicals. But they also have higher counterparty risk ie. there is a risk that the ETF goes insolvent. Physical metals have no counterparty risk.
– Different dealers have different spreads. You have to shop around for the dealer with the lowest spread. Dealers also want to keep customers in-house and so will give better buy back rates to customers who bought from them.
– Coins have higher premiums than bars. For 1 troy ounce of gold, premium for coin vs bar is 4% vs 2.6%. Coins have more labour cost.
– Smaller coins have higher premiums than bigger coins. Similarly smaller bars have higher premiums than bigger bars. The premium on a 1/10th ounce gold coin can be as high as 15-20%.
– Minted bars have higher premiums than cast bars
– Coins are more expensive than bars but harder to counterfeit and easier to offload.
I provide an extract of a bullion listing below for demonstration purposes. Refer to the premium and spread information indicated.
Take note of the spreads and premiums as these will affect and determine your purchasing strategy