Premium (Agio)
Also: agio, premium, coin surcharge, dealer surcharge
The premium (agio) is the amount by which the selling price of a precious metal coin or bar exceeds the current metal value (spot price).
Anyone buying a gold coin or a silver bar almost always pays more than the pure metal value. The difference between the dealer's selling price and the current spot price is called the premium – in financial jargon also agio. The premium is not a hidden fee but compensates real costs of the physical precious metal chain: minting, logistics, insurance, dealer margin and – for silver and platinum – VAT.
Formula and calculation
The premium can be expressed absolutely (in pounds) or relatively (in per cent):
Premium (£) = selling price − (spot price × fine weight in oz)
Premium (%) = (selling price / (spot price × fine weight) − 1) × 100
Example: The gold price stands at £2,800/oz. A Krugerrand (916 gold, fine weight 1 oz, gross weight approx. 1.09 oz due to the copper content) costs £2,900 at the dealer.
Premium (£) = 2,900 − 2,800 = £100
Premium (%) = (2,900 / 2,800 − 1) × 100 ≈ 3.57%
With the purchase price calculator you can see the mirror image – how much a dealer deducts when buying back. The difference between the buying and selling premium is the spread.
Factors influencing the size of the premium
The premium is not fixed but depends on several variables:
| Factor | Effect on the premium |
|---|---|
| Denomination | Smaller units (1 g, 1/10 oz) = higher relative premium |
| Product type | Bars < bullion coins < collector coins (proof) |
| Market situation | High demand / supply shortages push premiums up |
| VAT | Silver, platinum, palladium: +20% VAT (UK) or margin scheme |
| Origin | UK/EU mintages often cheaper (no customs/import) |
| Dealer structure | Online direct dealer vs. coin dealer/bank |
Denomination effect – gold bar table
| Weight | Typical premium (%) |
|---|---|
| 1 g | 8–15% |
| 5 g | 4–8% |
| 10 g | 3–5% |
| 1 oz (~31.1 g) | 2–4% |
| 100 g | 1.5–3% |
| 1 kg | 0.8–2% |
The reason is simple: fixed costs for packaging, certificate and insurance arise regardless of weight and are spread over a smaller amount of metal.
Premium on silver – the tax effect
Silver is subject to the full 20% VAT in the United Kingdom. This makes up a considerable part of the nominal premium investors pay. Dealers may under certain circumstances apply the margin scheme (VAT Notice 718), so that only the trading margin is taxed – reducing the surcharge. When comparing silver offers it always pays to check whether the displayed price includes VAT. Note: tax effects depend on the individual case – this is not tax advice.
Premium and resale
When selling, the dealer usually pays no premium back – they buy near the spot price or slightly below. This means: anyone who buys and sells physical precious metal in the short term must first "earn back" the premium before reaching profit. With gold bars that have a low premium (< 2%) the break-even threshold is low; with collector coins carrying a high premium it can be very high.
For long-term investors the premium plays a minor role, because as a percentage share it shrinks as the metal price rises. However, anyone buying silver or platinum should note that VAT paid is not refunded when selling to a private dealer.
Premium comparison: bullion coins at a glance
| Coin | Metal | Typical buying premium (1 oz) |
|---|---|---|
| Krugerrand | Gold | 2–4% |
| Vienna Philharmonic | Gold | 2–4% |
| Maple Leaf | Gold | 2.5–5% |
| American Eagle | Gold | 3–6% |
| Vienna Philharmonic | Silver | 15–25% (incl. VAT) |
| Maple Leaf | Silver | 16–28% (incl. VAT) |
With the melt value calculator you can determine the pure metal value of a product – the difference to the purchase price is the absolute premium.
Premium as a market indicator
In times of crisis premiums often shoot up: when demand for physical gold and silver exceeds available supply (delivery bottlenecks at mints or refineries), the premium on bullion coins can briefly rise to double or triple the normal level. The premium is thus an indirect sentiment indicator for demand for physical metal – independent of the spot market price, which is formed via futures and the LBMA fixing process.
In brief
The premium (agio) is the unavoidable surcharge on the spot price that buyers of physical precious metals pay for minting, logistics and dealer margin. It pays to compare premiums actively, opt for favourable denominations and factor in the tax component for silver – because the lower the premium at purchase, the sooner you are ahead on resale.