What’s the Real Cost of Buying Gold?

Gold has long been considered one of the best safe-haven assets, a sign of wealth, and a reliable store of value.

If you are considering your first investment in gold, you have most likely come across the question: “Why is the price I pay higher than the spot price of gold?” The spot price is the foundation, but there are a number of additional factors that affect the final price you pay to purchase gold. Here is a breakdown of what you need to know to understand the true cost of owning this precious metal.

1. Spot Price: The Core

To start off, we first need to understand what the spot price of Gold really is. Spot price refers to the market trading price of 1 troy ounce of Gold. This price fluctuates throughout the day as markets are open and it is primarily affected by factors such as supply and demand, global economic and political events, as well as market trends. The spot price is the global standard that everyone including big banks refers to. However, this spot price that everyone trades in does not refer to the true cost of the Gold that you will be able to purchase.

2. Premiums: The Extra Expense

If you buy physical gold, such as coins, bars, and rounds, you pay a premium above the spot price. 

This premium accounts for:

• Manufacturing Costs: Refining raw gold into bars or minting coins requires sophisticated technology, labor, and accuracy.
• Design and Brand: Coins created by prestigious mints such as the Royal Canadian Mint or the U.S. Mint charge higher premiums due to their artistry and recognition.
• Premiums by Size: Smaller units typically have a higher premium over the per-ounce price of a bullion round or bar because the cost to produce is a larger proportion of the total production cost.
• Market Demand: Premiums can elevate considerably, especially for in-demand products, when there is a market demand spike.

3. Dealer Margins

Gold dealers operate like any other business; they need to cover expenses and make a profit. The dealer margin varies with one’s reputation, variety of offerings, and sales numbers. Choosing a dealer, such as AU Bullion, with competitive pricing and transparency is key.

4. Shipping and Insurance

You may incur shipping and insurance charges when you buy gold online as well. These protect your investment on its way to you. Our goal at AU Bullion is to keep these costs as low as possible while providing a safe delivery service.

5. Taxes and Duties

Gold purchases are subject to taxes in some jurisdictions (e.g., GST, VAT, or sales tax). These costs can vary based on your location and your gold products of choice. Knowing local tax statutes is key to calculating the overall cost.

6. Storage and Security

Another cost that many investors incur after purchasing physical Gold is the storage cost. Gold is a highly valuable commodity so it is something that you would want to store in a safe and secure location. Many investors choose storage solutions such as home safes, bank safety deposit boxes, and professional vaulting services. 

Why AU Bullion

At AU Bullion, we aim to give customers the best value possible by offering transparent pricing with no hidden fees to offer competitive rates. Additionally, we have the lowest premiums in Canada on Gold and Silver to ensure that all our clients can get the best possible return on investment. Additionally, we have a wide variety of selections for our clients to choose from to give you a unique investment portfolio. 

Conclusion

Buying gold involves costs beyond the spot price. By understanding the factors—premiums, dealer margins, storage, and taxes—you can make more informed decisions. At AU Bullion, we strive to give everyone the best possible deal on precious metals while offering expert advice so you can make an informed decision on your next investment!