Spread
Also: Bid-Ask Spread, Bid-Ask Gap, Trading Margin
The spread is the difference between the buying price (bid) and the selling price (ask) of a precious metal, representing the dealer\'s implicit trading margin.
The spread – also known as the bid-ask spread or trading margin – is one of the key metrics when buying and selling precious metals. It refers to the difference between the price at which a dealer buys (bid price) and the price at which they sell (ask price). Anyone who buys a gold coin today and immediately sells it back will inevitably realise a loss equal to the spread – without the market price having moved a single cent. The spot price always lies between the bid and the ask.
Formula and Calculation
Spread (absolute) = Ask price − Bid price
Spread (in %) = ((Ask − Bid) / Ask) × 100
Example: A dealer offers a 1-ounce gold coin for EUR 2,380 (ask) and buys it back for EUR 2,310 (bid). The spread amounts to EUR 70, or approximately 2.9 %.
The Buying Price Calculator shows you what resale value is realistic at current market prices.
Spot Market vs. Physical Trade
On the professional interbank market (OTC spot market in London), spreads for gold are extremely tight: large market participants trade standard lots of 100 fine ounces at margins of as little as 0.05–0.30 USD per ounce. Private investors buying physical gold or silver pay substantially wider spreads because the following cost factors are priced in:
- Minting and fabrication (particularly high for coins)
- Logistics and insurance (transport, storage, delivery)
- Dealer liquidity buffer (hedging against price movements in inventory)
- Distribution and operations (platform costs, staff, compliance)
Spread Comparison by Product Type
| Product | Typical spread over spot | Liquidity |
|---|---|---|
| Large gold bar (400 oz, LBMA Good Delivery) | 0.1–0.5 % | Very high |
| Gold kilo bar (retail) | 0.5–1.5 % | High |
| Krugerrand / Maple Leaf 1 oz | 2–5 % | Medium–high |
| Small gold bar (1 g) | 8–15 % | Low |
| Silver coin 1 oz | 5–15 % | Medium |
| Silver kilo bar | 3–7 % | Medium |
| Platinum coin 1 oz | 4–10 % | Low |
Note: The figures are indicative and vary by dealer, market conditions, and order volume.
Factors Influencing the Spread
1. Market liquidity: Gold is the most liquid physical precious metal in the world – its spreads are correspondingly tight. Silver, platinum, and palladium generally carry wider percentage spreads for the same denomination.
2. Denomination: Small units carry relatively high fabrication costs – a 1-gram gold bar costs almost as much to produce as a 10-gram bar, yet its material value is ten times lower. As a result, the percentage spread rises sharply as size decreases.
3. Market volatility: During periods of crisis, sharp price moves, or thin market liquidity (e.g. public holidays), dealers widen their spreads to cover elevated pricing risk. Keeping an eye on the current gold price allows investors to identify such phases by rapidly changing quotes.
4. Competition: High dealer competition compresses margins. Online dealers with high volumes can offer tighter spreads than local coin shops.
5. Premium (agio): In physical trading, the spread is often communicated as part of the premium. The premium encompasses not only the dealer spread but also fabrication costs and, where applicable, taxes (for silver, VAT).
The Spread on the Sell Side: the Buying Price
Anyone selling physical precious metal always receives the buying price – the dealer's bid. This lies below the current spot price. The difference between the price paid when buying (ask) and the price received when selling back (bid) equals the full spread that the investor must absorb.
For a realistic return calculation, the spread should therefore be understood as an "entry cost": the precious metal must first appreciate by at least the spread amount before a position breaks even.
Note: Return and tax calculations vary by individual circumstances. This does not constitute investment or tax advice.
Spread vs. Premium: the Difference
The term premium (agio) is used more broadly in the physical precious metals trade. It describes the total markup over the spot price – including minting costs, logistics, dealer margin, and (for silver) VAT. The spread in the strict sense is only the difference between a dealer's buying and selling price. In practice, however, both terms are often used interchangeably.
Key Takeaway
The spread is the unavoidable transaction cost of physical precious metals trading: the larger the denomination, the more liquid the metal, and the more stable the market, the tighter the margin. Comparing offers before purchasing and sticking to standardised products noticeably reduces the spread disadvantage – and thereby improves the return efficiency of an investment.