What Does Over Spot Mean When Buying Gold

When buying gold, you might come across the term "over spot" and wonder what it means. Over spot is the difference between the dealer's asking price and the actual spot price of gold.

The spot price is the current market price of gold, which can fluctuate throughout the day. It's the price at which gold is traded on the open market.

To give you a better idea, let's say the spot price of gold is $1,500 per ounce. If a dealer is selling gold for $1,600 per ounce, the over spot is $100 per ounce.

The spot price of gold is the current market price at which gold is bought or sold for immediate payment and delivery. It's essentially what you would pay "on-the-spot" as opposed to some date in the future.

The spot price of gold refers to the price for one troy ounce and is generally quoted in U.S. dollars. One troy ounce is defined as exactly 31.1034768 grams.

Spot prices can be driven by market speculation, fluctuations in gold futures, currency values, current events, gold supply, and gold demand. They're updated every minute and set at different times around the world at markets in New York, Chicago, London, Zurich, China, and Hong Kong.

The spot price does not account for any other costs associated with the design, manufacture, transportation, purchase, or sale of a precious metal, such as packaging, shipping, handling, or insurance.

The spot price of gold is the current market price at which gold is bought or sold for immediate payment and delivery. It's essentially what you would pay "on-the-spot" as opposed to some date in the future.

The spot price of gold refers to the price for one troy ounce and is generally quoted in U.S. dollars. A troy ounce is a standard unit of measurement for precious metals, and it's defined as exactly 31.1034768 grams.

The spot price is determined by a host of factors including market speculation, fluctuations in gold futures, currency values, current events, gold supply, and gold demand. These factors change on a daily if not hourly basis, so the spot price of gold can fluctuate rapidly.

The spot price does not account for any other costs associated with the design, manufacture, transportation, purchase or sale of a precious metal, including costs like packaging, shipping, handling, or insurance. This means that buying a gold coin or bar at the spot price of gold is not as straightforward as it seems.

The spot price is largely determined by precious metals futures contracts, rather than actual physical supply and demand. This can make the price of gold coins seem disconnected from the actual market price.

The spot price is an average net present value of the estimated future price of gold, based on traded futures contracts and the nearest month, called the front month. This means that the spot price is an estimate of what the price of gold will be in the future, rather than the actual current price.

The spot price plays a crucial role in determining the prices you pay for physical gold, silver, platinum, and palladium. It acts as an anchor for all parties along each precious metal's supply chain, from miners to refiners to dealers like JM Bullion.

You are buying gold, silver, platinum, or palladium at slightly above the spot price when you buy it, regardless of whether it's from a dealer or a mint. This is because the price includes various costs like production, transportation, and profit margins.

Premiums can significantly impact your bullion investing strategy. If you want to maximize the amount of ounces you acquire, it's best to stick with low-premium items like generic rounds, generic bars, and old coins.

Low-premium items are often less expensive, so you can buy more ounces for your money. For instance, if silver is $20 per ounce, you might pay $23 per ounce for a generic silver bar, but that's still a relatively low premium.

When you pay a premium, you're essentially paying for the costs associated with minting, shipping, and distributing bullion products. These costs can vary depending on the item and market conditions.

Several parties are involved in the process, including the U.S. Mint, large distributors, and coin shops or bullion dealers. Each party pays a small premium to cover their costs, which is eventually passed on to the consumer.

Premiums can fluctuate significantly over time, based on demand. For example, American Silver Eagles were only $3-$5 over spot a few years ago, but today premiums are 2-3x that amount.

Here's a rough idea of how premiums can affect your bullion investing:

Keep in mind that you can recapture some of the premium when you sell your bullion, but not all of it. If you pay a $6 premium when you buy, you might get a $2-3 premium over spot when you sell.

First, you need to understand that over spot refers to the price difference between the market price of gold and the dealer's selling price.

In the US, the gold market is regulated by the Commodity Futures Trading Commission (CFTC) and the Federal Trade Commission (FTC).

Dealer markups are a significant factor in the price of gold, and it's essential to understand what they cover.

A premium is the amount over spot that you pay for a bullion item, which includes the cost of refining, minting, distribution, and a profit for the dealer or dealers involved.

Several parties are usually involved in the process, including the U.S. Mint, large distributors, and coin shops or bullion dealers.

The cost of minting physical coins or bullion products, shipping and distributing bullion, and the profit margin for the dealer are all factored into the premium.

For instance, if you pay $5 over spot for silver, the dealer themselves may be paying $1-$3 over spot for the items themselves.

Here's a breakdown of the parties involved and their potential markups:

By understanding these markups, you can make informed decisions about your bullion investments and maximize your ounces.