Physical bullion should be a part of every precious metal portfolio. But new buyers can often be confused about prices.
The very first thing you should know about buying physical precious metals is that all bullion prices have a premium added to them.
In other words, a one-ounce gold coin is going to cost more than the cash spot price as quoted by the CME Group. And that goes for all other metals (silver, platinum, etc.) in every form of bullion (coins, bars, etc.).
What’s with this premium?
Well, it’s not free to produce, distribute, or market a refined bullion product like a coin or bar. So the refineries and mints that produce gold and silver bullion charge dealers a premium right off the bat. The U.S. Mint, for example, charges a $2.00 per coin premium to authorized purchasers for American Silver Eagles.
The authorized dealers then slightly add to that premium for their time, risk, and profit. And the premium continues to slightly grow through the chain of sales from producer to consumer.
Now, there’s no set standard for bullion premiums on the retail level. Different bullion dealers charge different premiums. So it’s always important to shop around.
But, in general, the premium for gold and silver bullion is going to depend on a few things, regardless of which dealer you choose.
Coin or Bar Size
Generally speaking, the premium for larger bullion coins and bars is lower than smaller weights. So fractional bullion coins (like 1/10-, 1/4-, and 1/2-ounce coins) are going to have a higher premium than full one-ounce coins.
For example, the premium on a one-ounce American Gold Eagle might be anywhere between 4.0% and 9.0%. But for a 1/10-ounce American Gold Eagle, the premium could be between 10.0% and 20.0%.
Purchase Size
The premium for gold and silver bullion will almost always depend on your purchase size. Larger purchases carry a smaller premium, and vice versa. The difference in the premium can be as much as 3.0%.
Method of Payment
Your method of payment actually makes a very big difference when buying gold and silver bullion. Paying with a credit or debit card or PayPal always carries a higher premium. Using an electronic check, bank wire, or simply paying in cash is always more affordable. And the difference in premium between the two options can be as much as 5.0% or 6.0%.
Shipping and taxes should also be considered part of a bullion purchase premium.
To illustrate how bullion prices can vary, take a look at this screenshot of a listing for 2016 one-ounce American Gold Eagles from bullion dealer APMEX:
Every major online bullion dealer is going to have similar pricing charts. What you see is the gold cash spot bid and ask prices at the top, and the pricing breakdown of volume and payment type. And right off the bat, you’ll see exactly how much the final cost of bullion can vary.
Most of the major bullion dealers like APMEX, JM Bullion, and Provident Metals have very similar final prices. In fact, most often, shipping and handling charges ultimately determine which dealer has the best prices at any given time.
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There are a few websites to compare bullion prices from online dealers. None of them are really great for price comparison. But they are a good place to start:
www.comparegoldprices.com
www.comparegoldandsilverprices.com
These websites (and all others I’m aware of) don’t include prices from every bullion dealer. Moreover, you’ll immediately notice that the prices usually quoted on these comparison websites are for bulk purchases (20+ ounces) using an e-check, bank wire, or other form of discounted payment that isn’t as easy as just using a credit card.
Among the dealers with the most consistently lowest prices is Bay Precious Metals. However, it’s also one of my least-favorite dealers.
Bay Precious Metals is a subsidiary of Coins ‘N Things of Bridgewater, Massachusetts, which is the largest wholesale vendor of gold in the United States. So the company is not a fly-by-night operation.
But it only sells to retail customers through eBay. That ends up meaning its shipping options are very limited. And as a past customer myself, I can tell you firsthand that shipping is very slow. Still, if you have an eBay account and you don’t mind waiting, Bay Precious Metals really does have the lowest prices for bullion around.
But now, you’ve done your shopping around… found the best current prices… bought the bullion… and it’s shipped to you… What the heck do you do with it?
You don’t want to keep precious metals in your sock drawer as much as you don’t want to keep cash there — and for the same reasons: it could get stolen. If you don’t have an ultra-secret, highly secure safe in your house, put your precious metal investments in a safety deposit box at a bank.
My safety deposit box costs me $55 a year. It’s probably the best $55 a year I spend because my house has been broken into before.
To sum it up…
- Shop around.
- Buying more bullion at once is more affordable.
- Pay with an electronic check, bank wire, or cash (if possible).
- Keep your precious metals in a bank.
Until next time,
Luke Burgess
Wealth Daily
