Precious Metals Basics
The Essential Facts for Physical Gold, Platinum and Silver Buyers

The "spot" or "cash market" prices for precious metals are the benchmarks for physical trading, where terms are typically immediate payment for immediate delivery. In theory, these spot prices are set at a slight discount to the nearest futures price, with this discount reflecting the carrying costs of the physical metal, such as interest and storage. In practice, there is no universal spot price, as buyers and sellers often compute this discount somewhat differently, and physical supplies in the cash market will fluctuate. However, most traders refer to commonly known spot prices such as those offered by kitco.com as benchmarks for trading.

Fabricated precious metals, in coin or investment ingot form, are offered for delivery at a premium to the spot prices. These premiums vary depending upon the popularity of a certain form, such as American Gold Eagles, or upon successful marketing efforts, such as for pre-1934 European gold coins. In the end, it's important to remember that we are more concerned with content and cost than form and marketing.

Gold coins such as the American Gold Eagle, Austria Gold Philharmonic, Canada Gold Maple Leaf, and South Africa Krugerrand, are produced by government mints, and actively marketed to both bullion investors and coin collectors. Bullion gold coins range in purity from .9000 to .9999 fine, yet are traded based upon their pure gold weight. Gold ingots, or bars, are produced by private refiners, and are marketed almost exclusively to gold bullion investors. Gold ingots are .9999 fine, and are traded based upon their pure gold weight. Gold ingots produced by PAMP Suisse and Credit Suisse are widely traded and universally recognized for their purity.

For investors that have experience trading gold and silver futures, or even exchange traded funds such as GLD or SLV, buying physical metals introduces a new variable - the demand and supply for specific forms. At all times, our concern is content and cost, how much pure precious metal are we buying and at what price, with a preference for .999+ fineness. However, as buyers of physical precious metals, the prices that we pay are subject not only to the spot metals prices, but the demand and supply for the metals in different fabricated forms and the premiums attached to those forms. For example, the supply of American Gold Eagles from the U.S. Mint has recently been unreliable, restricting availability and pushing premiums to historically high levels. If you will buy gold only as American Gold Eagles, you will pay a higher price for that form that you may not recoup when the time comes to sell.

Due to the higher costs in handling and shipping, physical metals are not efficient trading vehicles. Physical metals should be held privately, preferably in a bank safety deposit box or other readily accessible secure vault. Physical precious metals should not be held in an IRA or be stored with a third party custodian.

Precious Metals Pricing & Availability :: Precious Metals Myths

Gold Coins & Ingots :: Platinum Coins & Ingots :: Silver Coins & Ingots