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Why Premiums Matter More Than Most Buyers Realize
As an investor in gold or silver, the majority of your focus will naturally fall on the spot price. And rightly so, as the spot price is the price of the precious metal in the market. However, when it comes to investing in physical bullion, there’s another price to consider, and it’s just as important. That price is the premium. And for the majority of investors, the premium will have more of an effect on the value of the precious metals they’re investing in than they think.
What is the Premium?
The premium is the price paid over the spot price for investing in physical bullion. It’s the cost of the precious metals, as well as the cost of acquiring them. While the spot price represents the value of the precious metals, the premium represents the cost of acquiring the precious metals.
Why Premiums Matter So Much
Two precious metals products may have the same amount of precious metals, yet one may cost substantially more due to the premium. As such, your entry point into the precious metals market is not only based on the spot price, but also the premium. For instance, the spot price may go down, but the premiums may go up. As such, an investor may not necessarily save any money, even with the spot price dropping. Experienced investors do not base their investment decisions on the spot price.
Some Products Carry Higher Premiums
Government-issued coins, collectible coins, specialty bars, and limited release products often have higher premiums due to increased demand, branding, and/or lower availability.
On the other hand, more basic bullion products, like standard silver bars or standard gold bars, often have lower premiums and give you more bang for your buck.
Neither of these is inherently “bad” or “good.” It all comes back to what you want to accomplish.
More Ounces with Lower Premiums
If you’re looking to buy gold and silver bullion and stack up as much as you can, then lower premium bullion is the way to go.
But why? Because you’re essentially getting more bang for your buck. More of your money is going towards the actual gold and silver content rather than the premium.
In the long run, this can add up and make all the difference for investors looking to stack up.
Higher Premiums aren’t Always the Enemy
However, there are times when higher premiums aren’t necessarily bad. Sometimes bullion has strong resell value due to the branding and/or the ability to easily resell the item. For example, if you buy Maples, Eagles, or other government-issued coins, these have strong resell value and are easily sold.
The Bottom Line
When it comes to buying bullion, the premium should be just as important as the spot price.
It’s not just about buying gold and silver when the prices are low; it’s also about understanding the value you’re getting for your money.
At AU Bullion, we have a wide selection of gold and silver bullion products at competitive prices to help you make the best decision for your needs.
