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Why Is The “Spread” Important When Dealing With Gold

Donegal Dollop by Donegal Dollop
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Why Is The “Spread” Important When Dealing With Gold
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When you buy or sell gold there are a couple of things you need to be aware of. It is important to know the spot price and the price spread. The spot price changes everyday and it affects the price spread. But What Exactly Is The Price Spread? Simple answer: when you buy, the spread is the amount that the dealer offers over the spot price and when you sell its the amount a dealer will pay below spot.

Like most markets what you get when you sell will be lower than what you get when you buy, i.e. bid prices are lower than offers. This is simply because sellers want the highest price they can get and buyers always want a bargain. As a gold investor, it is important to know what the spread is, however most reputable Brisbane gold brokers display this price difference on their website for customers. You should be able to find out what the spread is because, it is simple the buyback price vs the selling gold. You can tell if you are getting a good deal on your gold or not if you know what the spread is.

Why do most gold dealers display their buy and sell prices on their website?

This is because a lot of Brisbane gold brokers have very high standards and want your business for both buying and selling of gold. A spread of 5%is more likely when dealing in 1oz and a spread of 3% when dealing with 1kg. The best gold brokers are base their spread of the market spot price and do not impose their own dealer’s spot price. This means that the broker will be transparent about what gold is being sold and the price differentials of each trade that happens when in their shop.

Why is there a “price spread” for gold?

Precious metals like gold are often sold for a higher price than the spot price (the price that someone can buy futures on the commodity’s exchange) – mathematically, it is impossible to provide or physically back the volume of gold that gets traded everyday. In the futures market

You would have to consider the process of mining, refining and minting gold. The final price accounts for that process as well as the work that goes into designing and engraving the gold. A 1oz gold bullion coin costs more than what an 1 oz of the actual metal really costs.

Some gold investors believe that buying gold coins from a national mint is the best way to invest in gold bullion. This means you should be looking at coins like Canadian Maple Leafs, American gold eagles or the Australian Kangaroos for best investment value. While speciality, designer coins with skulls and ships and other images commemorating one thing or another are great, they are far less liquid than government issued coins. It is also very hard to try and sell a commemorative gold coins overseas even if it celebrates the moon landing or Star Wars. Coins like that often have a higher spread and will not offer the same returns as government minted coins. Gold brokers won’t care that you have a limited edition Star Wars 20th anniversary commemorative coin. These coins are often best to be treated as numismatic coins and sold to collectors not gold investors.

Tags: Brisbane gold brokers
Donegal Dollop

Donegal Dollop

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