Gold: $2432.64 0.53
Silver: $32.19 0.24

Difference Between Spot Price and Retail Price

If you look at the listed price for silver or gold, you may get an idea of what these metals are “worth” at any given time. However, if you then decide to purchase some silver or gold, you will find that the price to do so is both different and more than the listed price.

You’re right to notice the difference. In fact, it’s important that you do. So, let’s discuss exactly what is happening, and how you can act as an intelligent investor within the system.

What is the spot price?

The spot price of gold or silver is the market price for it in the current commodity market. In other words, this price is how much a (troy) ounce of gold or silver is worth right now.

The immediacy of the price is important because the price for future contracts – that is, agreements to buy gold or silver at a future time – is usually different from the current market price, or spot price.

Somewhat ironically, the spot price itself is the product of futures contracts. However, they are the futures contracts that expire as close to the current time period as possible. These contracts are known “front month” contracts, and the COMEX (the Commodity Exchange, Inc.) uses them and their accompanying activity and volume to set the spot price.

This process is ongoing, too. Spot prices vary at a near-constant rate, and any precious metals dealer (like worth its salt is going to have its price feed updated as closely to real time as possible.

What are the bid and ask prices?

Now, here’s where it may get a bit confusing. There are actually two spot prices at any time, not one.

The spot price usually discussed and listed in public is the price to buy the precious metal. This same price is sometimes called the “ask” price due to the fact that the sellers of the metals are asking for that amount.

However, if you are selling your gold, your journey will begin with the “bid” price. The bid price is the amount that buyers are willing to pay you for your gold or silver.

Because of the tension between the sellers’ desire to get the highest price and the buyers’ desire to pay the least, the ask price is always slightly higher than the bid price.

The difference between the bid and ask is known as the “spread.” It is an important macro term for trading the precious metal (or any other commodity) because it indicates how easy it is to buy and sell these items.

A spread nearing zero means that the commodity’s liquidity is extremely high and it may be a good time to buy or sell in the market. A greater spread means that buyers and sellers are farther apart upon what price they agree, and it’s more difficult to move the commodity around.

What is the retail price?

The two spot prices – the bid and ask – are not the end of the story, however. If you use any kind of professional dealer, be it or someone else, you will notice that its prices for buying and selling gold and silver are different from the bid and the ask. Thus, you are seeing what are known as the “retail” prices.

Simply put, precious metals dealers are businesses like any others, and they work to facilitate your precious metals transactions – either buying and selling. Because they have to make a profit, they add surcharges onto the bid and ask in such a way that they can keep a small slice of the proceeds.

In general, retail prices are going to be higher than their respective bid and ask counterparts. However, the markup on the ask prices is always going to exceed that of the bid price. All things equal, dealers want to buy gold and silver for slightly less than when they sell it and keep the difference.

The importance of shopping around

What you have to realize about retail prices and their variation from the spot prices, however, is that these are not fixed amounts or set in stone.

Some dealers may offer ask prices well in excess of the spot price. Others may have their bid prices only nominally above the bid price in the market.

Furthermore, offers are fluid even within the dealer’s inventory itself. You will often find items “on sale” if you are looking to buy, or you may find a dealer willing to pay more for your particular pieces.

To be fair, we think that our offers are some of the best you will find in the market. However, we’d be remiss if we didn’t encourage you to shop around and look for the best deal. As long as the offer comes from an established vendor with a track record of trust, you should grab the lowest asks and the highest bids.

However, you should also proceed cautiously if a deal seems too good to be true. If you see a deal that seems heaven-sent, take a second to investigate why it may be there and if other dealers are making similar moves.

We hope that can be your choice for your silver, gold, or any other precious metals needs. We’re confident you’re in the right spot, but it is critically important that you have that confidence, too.