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What is the premium, what is the spread
Autor: Rolf van Zanten Date: 9 May 2024

What is the premium, what is the spread

When considering the choice between products, we advise examining their pricing structure. All products originate from recognized manufacturers and are globally tradable. Furthermore, our buyback guarantee applies to all products. When purchasing gold and silver, price discrepancies may occur between comparable products. This could be due to market conditions or because one mint offers a coin at a higher price than another mint. It is also possible that we have purchased a particular coin on a large scale and pass on the economies of scale to you.

We offer all our products transparently, enabling you to make the best choice. We apply the same markup (profit margin) to products within the same product group. Additionally, we always apply the same buyback guarantee per product group. 

The main price difference arises from our ability to purchase certain products from individuals, namely Pre-Owned Bullion. Since we acquire these products from individuals, they are always cheaper than new products directly from mints and refineries. New products incur production costs, the premium of the mint or refinery, and the costs for insured shipping to the Netherlands. Such costs do not apply to Pre-Owned Bullion as it is already in circulation. Therefore, this option is always the most attractive when buying gold and silver.
 
In the gold market, several terms are used to indicate how the price is determined precisely. These terms also facilitate easy comparison of products.
 
Premium: The premium indicates the amount you pay above the metal value. Usually expressed as a percentage, it can also be expressed as an amount in euros. The lower the premium, the less you pay above the metal value. This premium covers all costs involved in turning the raw material into a coin or bar and subsequently physically delivering it.
 
Price per gram: The price per gram indicates the rate at which you purchase a gram of pure gold or silver. It can be said that a low price per gram corresponds to a low premium. Since the premium is not always easily comparable with products of different weight categories, the price per gram is the simplest way to determine how to buy physical gold or silver as cheaply as possible. Note: a larger denomination is often more advantageous in terms of price per gram, but this is also because you are buying one relatively large bar. For example, producing a one-kilogram gold bar is much cheaper than producing 100 gold bars weighing 10 grams each. Buying a large gold bar often sacrifices flexibility when you want to (re)sell the gold or silver.
 
Spread: The spread indicates the difference between our purchase price and our selling price. If you proceed with a purchase and then decide to sell immediately, the spread indicates how much you will lose on that transaction. The spread is higher than the premium because there are effectively two transactions: a purchase transaction and a sale transaction. We strive to offer competitive rates for both the buying and selling parties with Pre-Owned Bullion, the products we repurchase from individuals. For instance, we repurchase investment gold coins at 100% of the current gold price. As a result, our spread is lower than with newly minted gold coins.
 

Conclusion

The starting point is to look for the lowest possible price per gram. This prevents, for example, purchasing silver bars subject to 21% VAT or gold bars in small denominations that are not interesting for investors. Then, consider your budget and the desired flexibility to sell (partially) later. A larger bar is always available at a lower price per gram, but you cannot cut off a piece of a large gold bar to sell a smaller portion – so it is less practical. Understanding the spread beforehand is important, as it shows how much the gold or silver price must rise for you to break even when selling (back). Considering the spread prevents purchasing products with unfavorable purchase rates or excessively high purchase prices. To compare products within a specific product group, you can compare premiums. We always display the most competitively priced products at the top of our product categories.