Premium
Also: surcharge, agio, mark-up
The premium is the surcharge over the spot price that buyers pay, on top of the pure metal value, when acquiring physical precious-metal products such as coins or bars.
Anyone buying physical precious metal never pays exactly the spot price quoted on the exchange. Between that theoretical reference value and the actual purchase price there always lies a premium – also called a surcharge or, in Latin-derived terms, an agio. It compensates for manufacturing, storage and distribution costs while also reflecting supply of and demand for the particular physical product.
What makes up the premium
The premium is typically composed of several elements:
- Minting or casting costs – mints and refineries charge for the production effort 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 Ireland silver is subject to the full VAT rate of 23 %, which lifts the premium considerably (→ silver surcharge due to tax).
- Market demand – in times of crisis premiums can rise sharply, because physical availability lags behind the spot quotation.
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 % |
*Guideline figures without warranty, 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 EUR 2,100 and the gold spot price is EUR 2,000/oz. The premium is (2,100 – 2,000) / 2,000 × 100 = 5 %.
With the Melt Value Calculator you can work out 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 when buying, but on selling (buy-back by a dealer) they are usually not refunded in full. The buying price a dealer offers generally sits close to the spot price, rarely far above it. This means:
- Anyone who buys a coin with a 5 % premium and sells it back shortly afterwards at the spot price realises an immediate loss equal to that premium.
- The longer the holding period, the smaller the relative impact of the premium on total return.
- Larger denominations (kilo bars, 500 g bars) carry lower premiums than small coins – so anyone aiming purely for a store of value often chooses large bars.
Premiums on the silver market
Silver structurally shows higher premiums than gold. Besides VAT, the manufacturing costs per troy ounce are considerably larger for silver relative to the metal value (the metal is cheaper, while the production effort is similar). Especially on small silver coins, the premium can substantially exceed the spot component.
In a nutshell
The premium is the unavoidable cost buffer between the spot price and the physical product. Anyone who understands it and compares it – by product type, denomination and dealer – makes better-informed purchasing decisions and avoids unnecessarily high mark-ups. This article contains no investment or tax advice.