Fixed premiums, percentage premiums, and dealer spreads compared

Q: Does a 5 percent premium mean a 5 percent loss?

No. The [exit bid](/gold-bar-purchase-exit-cost-case) and sale costs determine the immediate gap.

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

Formula

Fixed premium: spot plus dollars per unit
Percentage premium: spot times one plus rate
Ask-bid spread: ask minus bid

Best use

Fixed premium: Simple same-size comparison
Percentage premium: Scales with metal value
Ask-bid spread: 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.

Fixed vs Percentage vs Spread

Fixed premium

Formula: spot + $/unit
Best use: same-size comparison
At $30 spot: $5 = 16.67%
At $50 spot: $5 = 10%

Percentage premium

Formula: spot × (1 + rate)
Best use: scales with metal value
At $30 spot: 12% = $3.60
At $50 spot: 12% = $6

Ask-bid spread

Formula: ask − bid
Best use: two-way transaction gap
At $30 spot: —
At $50 spot: —

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.

Assign Charges to Stages

Acquisition: product and required delivery
Holding: storage and insurance over time
Disposition: shipping, assay, platform, payment deductions

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.