Premium
Also: Agio, Mark-up, Surcharge
The premium is the mark-up over the spot price that buyers pay when acquiring physical precious-metal products such as coins or bars, on top of 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 agio or mark-up. It compensates for manufacturing, storage and distribution costs and at the same time reflects supply and demand for the particular physical product.
Components of the premium
The premium is typically made up of several components:
- Minting or casting costs - mints and refineries charge a manufacturing fee per piece.
- Dealer margin (spread) - the difference between the dealer's buying and selling price.
- Logistics and insurance - transport, storage and insurance of physical stock.
- Taxes - in Malta silver is subject to the standard VAT rate of 18 %, which raises 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 % |
*Guide values without guarantee, depending on dealer, quantity and market situation. 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, 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 determine the pure metal value of a product; the difference from the purchase price corresponds to the absolute premium in euros.
Why the premium matters when buying and selling
Premiums are paid on purchase, but on sale (dealer buy-back) they are usually not fully refunded. The buying price is generally 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 spot price immediately realises a loss equal to that premium.
- The longer the holding period, the smaller the relative influence of the premium on the total return.
- Larger denominations (kilo bars, 500 g bars) carry lower premiums than small coins - those seeking a pure store of value therefore often choose large bars.
Premium in the silver market
Silver structurally shows higher premiums than gold. In addition to VAT, manufacturing costs per troy ounce are considerably higher relative to the metal value for silver (the metal is cheaper, the manufacturing effort similar). Particularly with small silver coins the premium can significantly exceed the spot component.
In brief
The premium is the unavoidable cost buffer between the spot price and the physical product. Those who know it and compare it - by product type, denomination and dealer - make better-informed buying decisions and avoid unnecessarily high mark-ups. This article contains no investment or tax advice.