How do gold dealers make their money?

    If you are new to investing you have probably come across the term “premium”.  There is lot that has been said about the spot price also known as the market price of gold. For one, the gold price is the same globally and it is always open, even on weekends. This means that there are people all over the world who are trading gold right now whilst other markets are closed. You can try to time the market to figure out when the best price to buy gold bars will be.

    The European gold markets open just when the Asian markets are closing. When European markets close, the US market opens. If you are looking into the gold market, keep in mind that they are largely affected by the supply of gold versus the demand. The price of gold is in constant flux depending on geographical markets but the fact that the markets don’t close, you can buy bullion online anytime and from anywhere.

    The supply of gold can come from different places. Investors would look to gold bullion products. Mining and refineries play a large role to the supply chain however the scrap gold is also a great source which is why there has been a growth in cash for gold dealers. You can find the spot price of gold online and most online gold sites post live prices.

    The importance of the gold spot price

    When you buy bullion online, it is very important to understand what the global spot market price of gold stands for. The global spot market price of gold is often used as a price basis for contracts such as gold futures or gold options, etc., where physical delivery is not the primary objective.

    What is the premium price

    If the buyer wants to buy physical gold, take delivery, then the premium is added to the market price of gold. A bullion premium is simply called a “premium” or sometimes a “mark-up” or “mark-up” in the industry. The word “premium” can be somewhat misleading as it refers not only to bullions bars but also to bullion coins.

    If gold is to be delivered, it must of course be in physical form, primarily in the form of bars, but also coins. There are costs involved in producing bullion or coins, and other costs must be covered such as shipping, insurance, administration, etc. All these factors need to be included in the dealers’ profit margin. And then there is the seller’s profit margin to cover.

    Professional investors or buyers who buy gold or silver do not always talk about the price of gold. There isn’t much room to negotiate the global gold market but this shouldn’t stop you from getting a better sale price, This takes understanding the gold premium.

    Gold spot price + gold premium = sale price of gold

    The global spot market price of gold is not the selling price of gold when a buyer buys gold. The sale price of gold is always the global price of gold on the spot market plus a premium.