Spot Price vs Physical Price
You may see one price for gold, silver or platinum in the news and another when you buy a bar or coin. Learn what a spot quote represents and why your actual buying and selling prices can differ.
What is a spot price?
A spot price is a market price for metal traded for near-term settlement under particular market conditions. Gold and silver prices commonly shown in the media refer to a troy ounce in the international wholesale market. A spot quote provides a useful reference for the metal's value at a particular time.
There is no single permanent spot price. Quotes move as markets trade, and different services may display slightly different prices or update at different times. Check the metal, currency, unit and time shown with any quote.
Why can a physical product cost more?
A finished bullion bar or coin has to be refined, made, handled and sold. The seller's quoted price may therefore include amounts beyond the spot value of its metal. The exact components depend on the product and provider.
Metal content
The underlying value begins with the product's fine metal content and a relevant market price.
Product premium
Making a particular bar or coin, packaging it and bringing it to market can add to the purchase price.
Other charges
Depending on the transaction, dealing, delivery, storage or other stated charges may also apply.
A simple example
Imagine that the reference value of the fine metal in a product is AUD $100. If the quoted purchase price is AUD $108, the buyer pays $8 above that reference value. This is an illustration only, not a current metal price or a FirstGold fee.
Suppose the price offered to buy that product back at the same moment is AUD $99. The difference between the $108 purchase quote and $99 sale quote is $9. The metal price would need to move enough to overcome that difference and any other applicable costs before the buyer could make a profit.
Remember: A spot chart tells you how a reference metal price has moved. It does not, by itself, tell you the full price you would pay or receive for a particular product.
What about prices in Australian dollars?
International precious metals are commonly quoted in US dollars per troy ounce. An Australian dollar quote also reflects currency conversion. As a result, the Australian dollar price can move even when the US dollar metal price changes very little.
What should you check before buying?
Compare the actual buy quote, the actual sell quote, the fine metal content and all applicable charges. Check when the quote becomes fixed and whether additional costs apply if you store or redeem the metal.
The next lesson looks more closely at premiums, dealing spreads and fees, so you can understand the total cost of a transaction.