Why is physical gold often more expensive than the spot price?

The spot price of gold is the current market price on international exchanges, determined by supply, demand, and economic factors. Yet when purchasing physical gold, you often pay more than the spot price. This price difference has several causes and varies by seller and product. Understanding how pricing works helps you better assess the value of gold.

What is the spot price of gold?

The spot price is the current market price at which gold can be traded immediately. On precious metal markets such as the London Bullion Market and the New York Mercantile Exchange, prices fluctuate based on economic indicators, geopolitical tensions, and monetary policy changes by global banks and monetary authorities.

The spot price reflects the value per troy ounce of pure gold. However, in the trade of physical gold, this price is not applied literally. The difference between the spot price and the sale price of physical gold is influenced by several factors that increase the final price, such as premiums and transport costs. These premiums can sometimes make gold nearly twice as expensive.

Why do physical gold prices differ from the spot price?

The difference between the spot price of gold and the price you pay for physical coins or bars lies in the additional costs. Producing, processing, and distributing physical gold involves extra costs. Market mechanisms such as supply and demand also play a major role in price formation. The higher the demand, the scarcer the gold becomes—driving up the price.

With physical precious metals, a premium is added on top of the spot price. This premium is influenced by production time and quality. Gold coins like the Krugerrand and Maple Leaf often have a higher premium due to their global recognition and tradability.

The role of supply and demand in the price of physical gold

When demand for physical gold increases, the premium above the already high spot price rises. This often happens during times of economic uncertainty or inflation, as investors seek safe-haven assets. These can be periods of high inflation, but may also include other events. During the COVID-19 pandemic, for example, both prices and premiums for precious metals surged.

Supply also plays a crucial role. Prices of physical gold products depend on mining operations, the production capacity of mines, and the availability of staff at refineries. Limited supply combined with high demand leads to higher premiums, explaining why you may pay more than the spot price during certain periods.

What are the costs of gold production and distribution?

Mining and processing gold involve significant expenses. Mining companies invest in expensive machinery, labor, and safety measures to extract gold from the earth. Once mined, the raw gold is refined to reach the required purity. Gold bars and coins are then pressed, minted, and verified before reaching the market.

In addition to production costs, there are also transportation and distribution expenses. Gold must be shipped securely and insured—often across long distances. These costs are passed on to the consumer and contribute to the difference between the spot price and the final retail price.

The impact of taxes and import costs on the gold price

In some countries, taxes and import fees significantly affect the price of physical gold. Within the European Union, gold bars and some gold coins are exempt from VAT. This exemption does not apply to other metals, such as silver. In countries without such exemptions—especially outside the EU—taxes can considerably increase the total purchase price.

Import duties also play a role. Importing gold from other regions adds extra costs due to tariffs and customs fees. These additional expenses explain why physical gold may be significantly more expensive than the spot price in certain countries.

Comparison of physical gold prices among different sellers

The price of physical gold varies between sellers—even for identical products. This is due to the different margins that vendors apply. Some charge higher premiums to cover operating costs such as staff and marketing. Others offer lower prices thanks to economies of scale or efficient business practices.

As of January 2025, a comparison shows that the prices for a 1 troy ounce gold bar vary significantly between sellers. At The Silver Mountain, a 1 troy ounce gold bar from C. Hafner currently costs €2768, which is lower than other sellers. For instance, GoldByPost.nl offers a comparable product at €2781. The Silver Mountain therefore offers an attractive advantage for buyers seeking competitive pricing and reliable quality.

Comparing sellers is essential when buying physical gold. Don’t just look at the premium, but also check for additional costs like shipping and insurance. Transparency about prices and terms is a key feature of trustworthy sellers.

Getting the best deal when buying physical gold

Getting a good deal on physical gold starts with comparing premiums from various providers. Choose a seller who offers clear information about pricing and avoid those with hidden fees.

Look for extra benefits such as secure storage options. We offer such secure storage in cooperation with our partner Edelmetaal Beheer Nederland, which has storage facilities in Rotterdam and Zurich, Switzerland.

It’s also wise to buy gold during stable market conditions, when demand isn’t overly high. Spreading purchases across different times helps you benefit from price fluctuations. Combining reliable sources with good timing ensures you buy physical gold at a favorable price.

Want to buy physical gold under the best conditions? Browse our full selection or contact us for personal advice.

Disclaimer: The Silver Mountain does not provide investment advice and this article should not be considered as such. Past performance is no guarantee of future results.