Because it’s the most common method, most investors buy gold bullion bars and coins from precious metals dealers. They pay spot gold price, plus a premium that usually ranges anywhere between 5% to 10%. The premium includes the costs of producing the product and the profit the dealer makes for providing his service.
Spot Gold Price
For those who may not know exactly what “Spot Gold Price” is, let me explain…
The value of gold, as with any commodity, is determined by the spot price. Spot price of a commodity is the price that is quoted for immediate (spot) settlement (payment and delivery). Keep in mind, this price represents gold in its pure state (.999 pure gold or fine gold).
In today’s world with computers the current or live spot price can be seen as it changes by the minute. My favorite website to view the live spot price is www.kitco.com.
As you enter Kitco’s site look to the left side of the window and you’ll see the section titled “Live Spot Gold.” This is the live spot price that fluctuates throughout the trading day.
As gold is bought and sold it raises and lowers the spot price. The spot gold market is trading nearly 24 hours a day as there is almost always a location somewhere in the world that is actively taking orders for gold transactions.
London Gold
As you review the site, look a bit lower at the section titled “London Gold Fix.”
Unlike the spot price, the London gold fixing is a clearly posted, quoted price for gold that occurs twice per day.
The objective in establishing this was to allow large quantities of gold to be bought and sold using a single price. Because this price does not fluctuate and can not be disputed, people in the industry such as gold mines, refiners, jewelry manufacturers, and banks use it as a basis for daily transactions.
The “London PM Fix” is the price used by those in the industry and will be the one we use as well.
You should regularly follow the “London PM Fix”, because this is the base price for all the formula’s used to determine how much to pay for the gold you buy.
