What Are Gold and Silver Premiums?

In the most basic sense, a premium is a buyer markup – a price above the base gold or silver prices as witnessed in wholesale trading and retail sales. But it's not as simple as that alone.

Which Items Have Higher Silver and Gold Premiums?

Precious metals premiums are generally higher for bullion items with numismatic tendencies. This includes pieces such as pre-1965 90% silver coins and pre-1933 U.S. gold coins. In recent years, United States Mint American Eagle coins have witnessed tremendous rises in numismatic interest, pushing up premiums even for typical bullion-finish coins within this program.

More utilitarian bullion items, such as bars or rounds, usually carry lower premiums. Though even among these pieces, price margins vary widely. For example, older or scarcer silver bars can command tremendous premiums over their silver spot price. This applies to bars such as vintage pieces from the Engelhard line.

Premium Comparison by Product Type

Why Are Gold and Silver Premiums Important to Know?

If there were no premiums, and every dealer charged just spot price, then virtually every bullion merchant you bought from would ask the same amount for like items. But that's not the way the economy works. Dealers must pay for overhead, employee salaries, insurance, and – yes – they're entitled to earn a little profit, too. That's why they're in business!

We also know that when it comes to customers choosing where they're going to make their purchases, it's not always the cheapest price that wins out. In a free, capitalistic marketplace, premiums are where the competition gets heavy. This holds true whether it be in the gasoline and convenience store industry or in the bullion world.

Unfortunately, a lot of people fixate on spot prices and will spend an inordinate amount of time chasing deals that approach spot prices. Sometimes these folks are successful in their bidding, but often they wind up getting burned in bad transactions. Or they may become saddled with subpar or sometimes even counterfeit goods they can't (and shouldn't) unload back onto the marketplace.

Tips for Buying Precious Metals & Shopping Around for Premiums

When you're ready to add gold to your portfolio or purchase silver bullion, smart shopping strategies can save you significant money while ensuring quality products.

1. Research and Compare: Do your research online or by phone, calling different dealers to get a feel for where premiums are on the items you wish to buy. You're going to find that prices do vary, but so might the level of service and selection.
2. Define Your Priorities: Ask yourself what you're looking for in terms of price, selection, and quality. Considering these factors, what's the overall value of what each dealer is offering you?
3. Understand Current Markets: Have a realistic expectation about where the market is. There was a time before the COVID-19 pandemic when you could expect to buy a recent-date American Silver Eagle for maybe $4 or $5 over spot per coin. Since the pandemic, increasing demand and slimmer supplies have pushed that premium to $8 or $10 or even more.
4. Shop in the Present: Live and shop in the now, not the then. The market premiums you may remember from a few years or a decade ago might have been the rule of the day then, but things are changing quickly in the bullion world.
5. Calculate Total Value: Do your homework, figure out what the prevailing premiums are for the items you want to add to your collection or portfolio. Then start crunching the numbers on what options work best for you.

You're going to find dealers selling items with outlying premiums on the low or high side. You'll also find a whole bunch offering competitive prices somewhere in the middle. Often, making that choice comes down to who offers a particular type of service or quality guarantee, speed of service, or most likely the availability of certain items.

Sometimes, something like brand loyalty, a recommendation from a trusted friend, or the rapport between you and the bullion staff is what seals the deal. No matter who you choose to buy your bullion from, make sure you're comfortable with the quality they offer as well as their experience and expertise in dealing with bullion.

Conclusion

Understanding precious metals premiums is essential for making informed investment decisions when you purchase gold or invest in silver. While premiums add to your initial cost above current gold prices and silver spot values, they also reflect important factors like quality assurance, dealer expertise, and product authenticity.

Remember that the lowest premium isn't always the best deal. Focus on the total value proposition including dealer reputation, product quality, customer service, and long-term relationship potential. By understanding how premiums work and shopping strategically, you can build a precious metals portfolio that serves your financial goals while ensuring you receive authentic, high-quality products from reputable sources.