Why Can’t I Buy Gold At Spot Price?
The spot price of gold is the current price listed on gold exchanges like the COMEX, the commodity exchange section of the New York Mercantile Exchange, the world’s largest commodity exchange. A spot price is the amount for settlement and delivery of gold bullion in huge quantities. To buy gold at spot price, the investor needs to be a member of the New York Mercantile Exchange, London Gold Exchange, or another exchange. All other buyers of gold bullion purchase elsewhere and pay premiums.
There is always an overhead to buying gold bullion, making it into coins or bars, transporting it, and selling to the investor. The cost to the investor of gold bullion bars and coins is typically 2.5% to 7% over the spot price of bullion for purchases of ten ounces or more. Buying gold in small quantities can be substantially more expensive depending upon where the investor purchases. An example of higher prices is the cost of individual purchases from the US Mint.
US Mint Price Grid for gold coins contains price ranges for all gold coins for a wide price range for gold bullion. When the spot price of gold bullion is between $1,000 and $1,049 an ounce, for example, the Mint will charge the following for one ounce coins: $1,410 for an American Buffalo Gold Proof, $1408 for an uncirculated American Buffalo, $1,285 for a Proof American Eagle, and $1,278 for an uncirculated American Eagle. The Ultra High Relief American Eagle will sell for $1,439. The cost of gold coins goes up proportionately with each increase in the spot price of gold. This is a markup of from 28.5% to 43.9% above the spot price of gold bullion, as opposed to the usual 2.5% to 7% paid to a gold bullion dealer.
The average investor cannot buy gold at spot price, but the average investor does not have to pay 43.9% above the spot price either. Thanks to gold exchanges, there is an affordable place to purchase gold.