Spread
Also: Bid-ask spread, Bid-offer spread, Trading margin
The spread is the difference between the buying price (bid) and the selling price (ask) of a precious metal and represents the dealer's implicit trading margin.
The spread – also called the bid-ask or bid-offer spread – is one of the central metrics when buying and selling precious metals. It denotes the difference between the price at which a dealer buys (bid) and the price at which they sell (ask). Anyone who buys a gold coin today and immediately sells it again inevitably realises a loss equal to the spread – without the market price having moved even a single cent. The spot price always lies between bid and 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 2,380 EUR (ask) and buys it back for 2,310 EUR (bid). The spread is 70 EUR or around 2.9%.
The Buying Price Calculator shows you what buy-back value is realistic at current market prices.
Spot Market vs. Physical Trading
On the professional interbank market (OTC spot market in London), spreads for gold are extremely tight: large market participants trade standard lots of 100 troy ounces at spreads of sometimes only 0.05–0.30 USD per ounce. Private investors who buy physical gold or silver pay significantly higher spreads, because the following cost factors are priced in:
- Minting and manufacture (particularly high for coins)
- Logistics and insurance (transport, storage, delivery)
- Liquidity buffer of the dealer (hedging against price fluctuations in inventory)
- Distribution and operations (platform costs, staff, regulation)
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 (private investor) | 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 values are guidelines and vary depending on the provider, market situation and order volume.
Factors Influencing the Size of 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 show higher percentage spreads for the same denomination.
2. Denomination: Small units have relatively high manufacturing costs – a 1-gram gold bar costs almost as much to produce as a 10-gram bar, but the material value is ten times lower. The percentage spread therefore rises significantly as size decreases.
3. Market volatility: In times of crisis, with strong price movements or thin market liquidity (e.g. holidays), dealers widen their spreads to cover the increased price risk. Anyone keeping an eye on the current gold price recognises such phases by rapidly changing quotes.
4. Competition: With strong competition among providers, margins fall. Online dealers with high volume can offer tighter spreads than local coin dealers.
5. Premium (agio): In physical trading the spread is often communicated as part of the premium. The premium includes, besides the dealer spread, manufacturing costs and, where applicable, taxes (VAT on silver in Malta at 18%).
Spread on Sale: 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 on purchase (ask) and the price received on resale (bid) equals the full spread that you as an investor have to bear.
For a realistic return calculation, the spread should therefore be understood as an "entry cost": the precious metal must first rise in value by at least the spread amount before a position crosses the break-even point.
Note: Return and tax calculations differ individually. This does not constitute investment or tax advice.
Spread vs. Premium: the Difference
The term premium (agio, English: premium) is used more broadly in physical precious metal trading. It describes the entire mark-up over the spot price – including minting costs, logistics, dealer margin and (for silver) VAT. The spread in the narrower sense is only the difference between the buying and selling price of the same dealer. In practice, however, both terms are often used synonymously.
In Brief
The spread is the unavoidable transaction cost of physical precious metal trading: the larger the denomination, the more liquid the metal and the more stable the market, the tighter the spread. Anyone who compares offers before buying and opts for standardised products noticeably reduces the spread disadvantage – and thereby increases the return efficiency of their investment.