Gold Buy and Sell Price: How the Spread Works and Why It Exists
The price at which you buy investment gold always differs from the price at which GOLDU would buy it back from you. This difference is called the spread, and it is a normal part of trading physical precious metals all over the world. How does the spread arise, what does it consist of and why is it not the same as a fee?
What is the spread and why does it exist for precious metals?
The spread is the difference between the selling price (at which you buy a product) and the buyback price (at which the dealer would buy it back). It exists because the dealer first has to purchase the goods, store them securely, insure them, verify their authenticity and only then sell or buy them again – each of these steps has a cost that is reflected in the difference between the two prices.
What the selling price consists of
The selling price is based on the spot price of the metal on the world market, plus the so-called premium – a mark-up covering production, packaging, certification, transport and the seller’s margin. The premium varies by weight, manufacturer and product type; the article Premium on gold: why the price per gram differs explains this in more detail. The spot price itself also changes in real time, which is why GOLDU updates the prices in its shop every three minutes.
What the buyback price consists of
The buyback price, by contrast, is based on the spot price of the metal minus the dealer’s margin, which covers the cost of authenticity checks, administration and the risk of reselling. The final buyback price is only set after the product has been physically received and checked for authenticity, condition, weight, fineness and origin – the detailed terms are in the Conditions for the Purchase of Investment Gold. Once the buyback price is agreed, we usually pay immediately by bank transfer to an account in the seller’s name; smaller amounts can also be paid in cash.
Why the spread is not a fee
The spread is often mistaken for a hidden fee, but in reality it reflects the real costs of physical trading – secure storage, insurance of shipments, authenticity checks and a reserve for market fluctuations between purchase and a possible resale. Unlike a one-off fee, the spread is variable and differs by product, weight and the current market situation.
How the spread affects short-term and long-term holding
The spread has the biggest impact on short-term holding – if you bought gold and sold it again straight away, you would first have to “make up” the difference between the selling and buyback price before the investment turned a profit. That is why physical investment gold is generally seen more as a tool for preserving value over the long term than for short-term speculation. For larger weights the spread is usually lower relative to the price, which further favours long-term, larger purchases.
When you want to sell your gold later, the article How to safely sell investment gold clearly summarises the whole process. GOLDU buys back only investment gold; we do not buy back silver.
Frequently asked questions
Is the spread the same for gold and silver?
No, the spread varies by metal, product, weight and the current market situation. In general, it is lower relative to the price for larger and more liquid products.
Can I check the buyback price in advance?
An indicative buyback price is shown directly with each product in the shop. The final price, however, is always set only after the product has been physically received and its authenticity, condition and specifications checked.
How quickly will I get my money at buyback?
Once the buyback price is agreed, we usually pay immediately – by bank transfer to an account in the seller’s name, or in cash for smaller amounts.
Why does the spot price affect the two prices differently?
The selling price adds a premium to the spot price, while the buyback price deducts a margin from it. Both prices share the same base but move in opposite directions – more in the article How the gold spot price is set.
Does a higher spread mean lower product quality?
No. The spread relates mainly to the costs of processing, verification and tradability, not to the quality of the metal itself – the fineness of investment gold and silver is always clearly declared.
About the author
Adolf Baumann, analyst at Baumann Group a.s. (GOLDU), has been working with precious metals for over 30 years. He has seen euphoria, crashes and panic on the markets – and he still enjoys it. He explains in plain language what moves the price of gold and silver and how to handle them without unnecessary mistakes. His weakness? He refuses to wear a suit.
