Hi,
It’s easy to focus on spot prices, premiums, and maker names when purchasing gold. There’s one more word, though, that’s equally valuable—gold melt value risk. You might never have heard of it; it does occur to many new buyers, but becoming familiar with it will make all the difference in purchasing and selling decisions.
What is gold melt value risk anyway, then? Let us elaborate and discover why every serious precious metals investor out there should care.
Gold Melt Value Description
The melt value is the raw material value of the precious metal content in a piece of gold—a coin, a gold bar, or a piece of jewelry—using the current spot price. The melt value is calculated by multiplying the piece in pure gold by the gold spot price in the ounce (or the gram).
For example, if you have a 1 oz gold coin and the current spot price for gold is $2,400 USD/oz, the melt value is roughly $2,400—independent of the brand or numismatic premium placed on the piece.
What Is Gold Melt Value Risk?
Gold melt value risk is the possibility that the resale value in the market for a gold product will fall close to or even below the melt value—especially once fees, commission, or lack of demand for certain products are factored in.
This is the way this risk develops:
Premium Products: You can buy a bar or coin at 10-15% spot premium. You can potentially sell it at—or even beneath—melt value if sentiment in the market turns or buyer interest wanes.
Designer or Branded Jewelry: Luxury gold pieces tend to have huge retail markup prices. When the sale materializes, however, the buyer will usually quote melt value only and will ignore the branding or design.
Low Liquidity Pieces: Rare or unknown gold coins may have limited prospective buyers. With a forced sale, you will have to sell at melt value or even less.
Why It Matters for Investors Protecting Your Investment
Understand the melt value risk in a bid to estimate the ratio of the invested amount associated with the precious metal content in reality to branding or collectibility. The knowledge aids in the creation of a more lasting precious metals holding.
Choosing the Correct Products
If your motivation is nondenominated investment, stick with high-purity, widely recognized bullion products such as Gold Maple Leafs, Gold Kangaroos, or PAMP Suisse bars, which are more likely to trade near spot price and retain value better.
Timing Your Exits
Premiums will go down in volatile markets. You will only get melt value on resale if bought at the high and the market falls. Understanding this risk helps in coming up with more savvy exit strategies.
Buyback Offer Explanation
Most dealers (like AU Bullion) quote buyback at off-the-melt value. You paid a large upfront premium in all probability, so there’s a good likelihood the redemption won’t amount to the original expenditure unless prices shoot way up.
How AU Bullion helps in managing Melt Value Risk
Here at AU Bullion to help guide you in making educated investment decisions. That’s the way we help restrict melt value risk for you:
Competitive Premiums: We offer some of the lowest premiums over spot in the United States and Canada.
Transparency in the purchasing process: You receive the highest price by selling gold or silver to us, especially for quality bullion.
Professional Advice: Our staff can help in selecting products providing the best combination of liquidity, value retention, and longer term potential gain.
Final Thoughts
Gold melt risk is not glamorous, but it is something every investor should seriously consider. When buying coins, bars, or pieces of gold jewelry, understanding how melt value will affect returns has everything to do with preserving wealth in the long term. Would you prefer more details on protecting your investments? Contact us or visit one of our Vancouver or Toronto showrooms at AU Bullion. We are eager to help you invest with confidence. AU Bullion – Real Gold. Real Prices. Real People.
