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 figures 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 by a single penny. The spot price always lies between bid and ask.
Formula and calculation
Spread (absolute) = ask price - bid price
Spread (in %) = ((ask - bid) / ask) x 100
Example: A dealer offers a 1-ounce gold coin for GBP 2,380 (ask) and buys it back for GBP 2,310 (bid). The spread is GBP 70, or about 2.9%.
The purchase price calculator shows you what a realistic buy-back value is at current market prices.
Spot market vs. physical trading
On the professional interbank market (the 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 buying physical gold or silver pay considerably higher spreads, because the following cost factors are priced in:
- Minting and manufacturing (particularly high for coins)
- Logistics and insurance (transport, storage, delivery)
- Liquidity buffer of the dealer (hedging against price fluctuations in stock)
- 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 guide figures and vary depending on provider, market conditions and order volume.
Factors influencing the size of the spread
1. Market liquidity: Gold is the most liquid physical precious metal in the world - accordingly its spreads are 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 make as a 10-gram bar, but its material value is ten times lower. The percentage spread therefore rises markedly as size decreases.
3. Market volatility: In times of crisis, during sharp price movements or when market liquidity is thin (e.g. holidays), dealers widen their spreads to cover the increased price risk. Anyone keeping an eye on the current gold price can recognise such phases by quickly changing quotes.
4. Competition: Where there is 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 covers, in addition to the dealer spread, manufacturing costs and, where applicable, taxes (VAT for silver).
Spread on selling: 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 on resale (bid) equals the full spread that an investor must 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 amount of the spread before a position crosses the break-even threshold.
Note: return and tax calculations differ individually. This does not constitute investment or tax advice.
Spread vs. premium: the difference
The term premium (agio) is used more broadly in physical precious metal trading. It describes the entire surcharge 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 fee 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.