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The basics: what is spot, bid & ask, spread and premium?

Published by Tavex Analysts 3 years ago
Gold price (XAU-GBP)
1,833.48 GBP/oz
  
- GBP4.99
Silver price (XAG-GBP)
24.70 GBP/oz
  
+ GBP0.50

Before purchasing in precious metals, make sure you know the basics.

What is spot? bid & ask? spread and premium?

The spot is the current market-clearing price of gold or silver set by supply and demand factors in the global financial markets. Spot price refers to 1 troy ounce of .999 fine gold or silver.

The bid (or buy as a layman’s term) is the price at which market participants, such as Tavex, are ready to buy gold or silver at any given time.

The ask (or sell as a layman’s term) is the price at which market participants, such as Tavex, are ready to sell gold or silver at any given time.

The spread is the difference between the ask and the bid price. For example, if the bid for a 1-ounce British Britannia gold coin is £1,400 and the asking price is £1,410, then the “bid-ask spread” is £10. A low bid-ask spread is often a good indicator of high liquidity. Products with high liquidity, such as the Gold Britannia coin, will have a lower bid-ask spread than other lesser known gold coins. This means that you will save money when trading in and out of your purchase.

A premium is added to cover the cost of the production and distribution of the item. Every product that Tavex sells comes with a premium. The premium is calculated by taking the price of a product minus the spot price of the metal. For example, if the current spot price of gold is £1,420, and if Tavex sells a 1oz Gold Britannia for £1,470, then the premium is £50 or 3.5%.

If you have any further questions, please feel free to Book a consultation or Contact us.

Gold price (XAU-GBP)
1,833.48 GBP/oz
  
- GBP4.99
Silver price (XAG-GBP)
24.70 GBP/oz
  
+ GBP0.50

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