Welcome to GMRgold’s series on Common Must Know Terms When Buying or Selling Gold or Silver Coins or Bars - This will the first video in a short series of videos that will explain a little about some of the terms that we think you must know before you enter the precious metals markets.
What is a troy ounce?
The weight of precious metals coins and bars are typically noted in troy ounces. The troy ounce is a unit of imperial measure, defined as exactly 31.1034768 grams or 1.0971 avoirdupois ounce (the United States measure for ounce.) One troy ounce of Gold is denoted XAU and one troy ounce of Silver is denoted as XAG.
What is the premium?
The premium is quite simply the amount you pay over the actual spot price for a Gold, Silver, Platinum or Palladium coin or bar. The premium amount consists of mint fabrication and manufacturing, distribution, and administration costs incurred by the mint or refiner in making the coin, plus a "mark-up" representing the cost of sale and the profit for the wholesaler selling the coin to a retail dealer. The retail dealer, in turn, will also "mark-up" its wholesale price of the coin to cover its own sales costs and realize a small profit (typically 1 – 4%) when selling the coin or bar into the investor market.
What is the spot price?
The spot price is simply the price at which a commodity could be transacted and delivered on right now. This is in contrast to futures or forward contracts. The spot price of gold refers to the price of one ounce of gold and the spot price of silver refers to the price of one ounce of silver. Gold and silver must be of specific fineness requirements.
How is the spot price determined?
The specific spot price for any precious metal is determined by the specific front month futures contract with the greatest volume. This futures contract can vary by month, from the current month to one or many months out.
What are fractional coins?
Fractional Gold and Silver coins are simply any weight of coin that is less than 1 troy ounce.
Fractional coins are available in half ounce, quarter ounce and tenth ounce sizes in both Gold and Silver. Fractional coins carry a slightly higher premium than their 1 oz counterparts, so we only recommend them if you have total budget limitations or are buying them with preparedness barter in mind. Otherwise, we recommend 1 oz coins in both Gold and Silver, as their premium per ounce is lower in comparison.