Premium
Also: Surcharge, Agio, Mark-up
The premium is the surcharge above the spot price that buyers pay when purchasing physical precious metal products such as coins or bars, in addition to the pure metal value.
Anyone buying physical precious metal never pays exactly the spot price quoted on the exchange. Between this theoretical reference value and the actual purchase price there is always a premium – also called a mark-up or agio. It compensates for manufacturing, storage, and distribution costs, and simultaneously reflects supply and demand for the specific physical product.
Components of the Premium
The premium typically consists of several components:
- Minting or casting costs – mints and refineries charge manufacturing costs per piece.
- Dealer margin (spread) – the difference between the dealer's buying and selling price.
- Logistics and insurance – transport, storage, and insurance of physical holdings.
- Taxes – in Germany, silver is subject to the full VAT rate of 19%, which significantly raises the premium (→ Silver VAT surcharge).
- Market demand – during crises, premiums can rise sharply because physical availability lags behind the spot price.
Premium Comparison by Product Type
| Product | Weight | Typical Premium* |
|---|---|---|
| Gold bar (cast) | 1 kg | 0.5 – 1.0% |
| Gold bar (minted, blister) | 100 g | 1.0 – 2.5% |
| Gold coin (standard bullion) | 1 oz | 2 – 6% |
| Gold coin (special edition/proof) | 1 oz | 10 – 40% |
| Silver bar | 1 kg | 5 – 12% |
| Silver coin (standard bullion) | 1 oz | 10 – 30% |
*Indicative values without guarantee, depending on dealer, quantity, and market conditions. Not investment advice.
Formula: Calculating the Premium
Premium (%) = (Purchase price – Spot price × Fine weight) / (Spot price × Fine weight) × 100
An example: a 1-oz gold coin costs 2,100 €, the gold spot price is 2,000 €/oz. The premium is (2,100 – 2,000) / 2,000 × 100 = 5%.
The Melt Value Calculator can be used to determine the pure metal value of a product; the difference from the purchase price equals the absolute premium in euros.
Why the Premium Matters When Buying and Selling
Premiums are paid upon purchase, but are usually not fully refunded upon sale (dealer buy-back). The buying price is generally close to the spot price, rarely significantly above it. This means:
- Anyone who buys a coin with a 5% premium and sells it shortly afterwards at spot price immediately realises a loss equal to that premium.
- The longer the holding period, the smaller the relative impact of the premium on the overall return.
- Larger denominations (kilo bars, 500 g bars) carry lower premiums than small coins – investors seeking a pure store of value therefore often choose large bars.
Premium in the Silver Market
Silver structurally exhibits higher premiums than gold. In addition to VAT, manufacturing costs per troy ounce are significantly higher relative to metal value for silver (the metal is cheaper, but the production effort is similar). For small silver coins in particular, the premium can substantially exceed the spot component.
In Brief
The premium is the unavoidable cost buffer between the spot price and the physical product. Those who understand and compare it – by product type, denomination, and dealer – make more informed purchasing decisions and avoid unnecessarily high mark-ups. This article does not constitute investment or tax advice.