What is the "SPOT Price" ?
If you're new to the Precious Metals market, it'll be helpful to understand that the number you hear on the radio or see on television, known as the “Gold Price, is actually the U.S.A. Future’s Market officially known as the SPOT LEVEL, SPOT PRICE or most commonly known simply as "SPOT". But understand that this is not the price Gold bars or coins are actually bought or sold at today. It is simply a benchmark number that the London Bullion Market Association (LBMA) sets twice a day, based on how Bearish or Bullish the world markets are for gold, and then the general free-market dictates it in-between those two time periods. When the refineries and mints purchase Gold, they pay a certain percentage under the SPOT LEVEL, and when the final product is sold to consumers/investors, it is sold at a premium above the SPOT LEVEL.
All dealers charge a "Premium" above SPOT. This Premium includes the costs to refine the item into a recognisable and sellable product along with other operating costs associated with running a business. The SPOT LEVEL plus the Premium, are combined to determine the final cost of the new, high-grade coin or bar from the Royal Canadian Mint, that is easily recognised and can be accepted anywhere around the world.
Another way to look at is, gold is just like any other product you purchase. Let's take a loaf of bread for example. If Safeway paid $3.00 for the loaf, and then only charged you $3.00 at the checkout, they wouldn't be in business very long. The same business principle stays true for the Precious Metal market. It is simply not possible to buy and sell an item for the same price and maintain a business. The SPOT LEVEL/SPOT PRICE is only a benchmark number, so one can not expect to purchase nor sell it for this number. Expect to pay more than SPOT when you purchase a new Gold product, and when you need to cash in on your investment, expect to sell it for slightly less than SPOT. Both of those numbers will be dependant on a number of factors including the current SPOT trending, the amount of gold you’re selling, and the condition/age of the products.