The price you pay for a physical coin or bar is not the number you see quoted on a financial news ticker. That number — the spot price — is only the starting point. Understanding how bullion is priced from the global benchmark down to the final invoice will help you evaluate dealers, compare products, and avoid unpleasant surprises.
The spot price
Spot price refers to the price at which one troy ounce of a metal can be bought or sold for immediate delivery in the global wholesale market. It is set continuously during trading hours by activity on major exchanges — principally COMEX in New York and the LBMA in London — and reflects institutional-size transactions in unallocated or good-delivery form.
Spot is a reference. Retail investors cannot generally purchase physical metal at spot because the number does not account for refining, minting, distribution, insurance, or the working capital required to hold inventory ready for delivery.
What is the premium?
The premium is the amount above spot that a buyer pays for a specific finished product. It covers the real costs of turning raw metal into a coin or bar that can be shipped, verified, and resold: fabrication, packaging, distribution, dealer margin, and — for sovereign coins — a seigniorage charge from the issuing mint.
- Fabrication and minting costs charged by the sovereign or private mint.
- Distribution from mint to authorized purchaser to retail dealer.
- Insurance and secure logistics at every step of the chain.
- Dealer working capital and inventory carrying cost.
- Product-specific demand — popular coins carry higher premiums than plain bars.
Bid, ask, and the spread
Every dealer maintains two prices for each product: a bid (the price at which the dealer will buy metal from you) and an ask (the price at which the dealer will sell metal to you). The difference is the spread, and it represents the dealer's compensation for making a two-sided market.
Narrower spreads indicate more liquid, more heavily traded products — typically sovereign coins from major mints. Wider spreads are common on obscure bars, damaged coins, or thinly traded pieces. Investors focused on efficient entry and exit generally favor products with the narrowest spreads.
The premium is the price of finish, distribution, and trust. The spread is the price of liquidity.
Locking a price
Because spot moves in real time, most dealers offer a price lock at the moment an order is confirmed. The locked price commits both parties: the dealer to deliver the product, and the client to pay for it. Understanding your dealer's lock policy — how long the lock holds, what happens if payment is delayed, and how price disputes are handled — is a basic diligence step before any purchase.
Comparing dealers
Once you understand premiums and spreads, comparison becomes straightforward. Ask two or three reputable dealers for a firm quote on the same product on the same day. The lowest headline number is not automatically the best deal — settlement terms, delivery timing, and buy-back commitments all matter. For a broader diligence checklist, see [Questions to Ask Before Buying Bullion](/knowledge-center/questions-to-ask-before-buying-bullion).