Base Price
Also: Underlying Value, Exercise Price, Strike Price
The base price is the standardised reference price of a precious metal on which premiums, dealer margins and options contracts are built.
The base price in precious metals trading refers to the reference price on which all further price components are built. Depending on the context, the term has two closely related meanings: in physical trading, it is synonymous with the spot price — i.e. the current market price for immediate delivery. In derivatives trading (options, futures), "base price" denotes the pre-agreed exercise price (also known as the strike price) at which a buyer or seller has the right to trade the precious metal.
Base price in physical precious metals trading
When buying gold bars or silver coins, the base price is the starting point for calculation. Dealers add the premium (agio) on top of it, which covers manufacturing and distribution costs as well as a profit margin. The resulting formula is:
Dealer price = Base price (spot) + Premium (in currency or %)
The base price itself is determined continuously on international commodity exchanges — in particular the LBMA in London and the COMEX in New York — and is quoted in US dollars per troy ounce. Current values are available on the gold price page.
Base price for options and futures
In the derivatives segment, the base price determines at which rate an option may be exercised:
- Call option: right to buy the precious metal at the base price
- Put option: right to sell the precious metal at the base price
If the current market price of a call option is above the base price, the option is "in the money". The historical price history shows how significantly base prices can deviate from agreed strike prices.
Distinction from related terms
| Term | Meaning |
|---|---|
| Base price / Spot | Current market price, immediate delivery |
| Buying price | Price a dealer pays the seller (below spot) |
| Dealer price | Price the buyer pays the dealer (above spot) |
| Spread | Difference between buying and selling price |
| Strike price | Pre-agreed exercise price for derivatives |
You can calculate the melt value — the pure material value without premium — directly in the calculator.
Note: Statements regarding the tax treatment of gains from derivatives transactions on precious metals do not constitute tax or investment advice.
Key takeaway
The base price is the foundation of every precious metals transaction: it reflects the current market value and serves both as the starting point for premiums in physical trading and as the agreed exercise price in derivatives. Anyone who knows the base price can competently assess dealer prices, premiums and option premiums.