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Part of Bullion pricing guide: spot, premium, spread, and fees
Fixed premiums, percentage premiums, and dealer spreads compared
Fixed premiums, percentage premiums, and dealer spreads compared through formulas, changing spot prices, product size, fees, bids, break-even effects, and use cases.
What to take away
- A fixed dollar premium changes as a percentage when metal price moves.
- A percentage premium changes in dollars when metal price moves.
- Dealer spread compares ask and bid; it is not the same as purchase premium over spot.
- Fees outside the displayed premium can reverse a ranking.
- Compare delivered ask with net bid for the exact product.
Three pricing forms
| Form | Formula | Best use |
|---|---|---|
| Fixed premium | spot plus dollars per unit | Simple same-size comparison |
| Percentage premium | spot times one plus rate | Scales with metal value |
| Ask-bid spread | ask minus bid | Measures two-way transaction gap |
At $30 spot, a $5 fixed premium is 16.67 percent. At $50 spot, it is 10 percent. A 12 percent premium equals $3.60 at $30 and $6 at $50.
Purchase premium
Purchase premium should use delivered price, not a headline that excludes card fee, tax, or shipping. It answers how far the acquisition sits above or below its chosen metal reference.
FINRA's discussion of fees and commissions concerns securities, not physical bullion, but clearly distinguishes transaction costs, spreads, and ongoing expenses. The same accounting discipline helps keep a bullion product price separate from custody and service charges.
For physical metal, assign each charge to one stage. Acquisition includes the product and required delivery. Holding includes storage and insurance over time. Disposition includes shipping, assay, platform, or payment deductions. Combining all three into one unnamed premium makes comparisons impossible and hides which costs continue after purchase.
Dealer spread
Worked example
Suppose a dealer asks $35 and bids $29 for the same one-ounce silver round. The $6 difference is the quoted spread. Relative to the ask, it is 17.14 percent. Relative to the bid, it is 20.69 percent. Label the denominator.
Keep quantity constant as well. A dealer may post a strong bid for sealed tubes but a lower bid for one loose round. The market side, unit count, package, and settlement method belong on the same quote line.
The general bid-ask spread reference defines the difference between the price available to an immediate buyer and an immediate seller. Physical bullion adds product, condition, quantity, testing, and fulfillment details to those prices.
Which method is better?
No method is inherently cheaper. Fixed premiums can favor buyers when metal prices rise and hurt when prices fall. Percentage pricing scales automatically. A narrow premium over spot can coexist with a wide buyback discount.
Comparison worksheet
For each quote, record:
- Reference and timestamp
- Fine content
- Pricing formula
- Delivered ask
- Purchase premium dollars and rate
- Gross bid and bid relation to reference
- Sale costs and net bid
- Round-trip gap dollars and rate
Common traps
- Fixed premium stated per item, compared with percentage per ounce
- Ask from today compared with bid from yesterday
- Wire ask compared with card ask
- Spot premium compared with futures quote
- Collector item compared with generic bullion
- Spread divided by an unlabeled denominator
Common questions
Is a fixed premium stable?
Its dollar amount may be fixed while its percentage changes with metal price.
Does a 5 percent premium mean a 5 percent loss?
No. The exit bid and sale costs determine the immediate gap.
Can a dealer bid above spot?
Yes, when product demand or scarcity supports a positive buyback premium.
Which denominator should a spread percentage use?
State whether it is ask, bid, spot, or purchase cost. There is no safe unlabeled percentage.
