How Precious Metals Are Priced and Sold in the Marketplace

    Published: 06-16-2009
    Views: 9,256
    Michael Maroney, Vice President at Monex Deposit Company, explains how precious metals are priced and sold in the market place.

    Michael Maroney: Hi! My name is Michael Maroney. I am the Vice President at Monex Deposit Company and we are talking about the different types of gold and silver you can buy. Right now we are talking about how precious metals are priced and sold in the market place.

    So let's talk about metal purity or fineness. Pure gold is 0.

    999 fine and what that means is it is 99.

    9% pure. When you hear 14 carat gold, that's 58% pure. That is not how you buy gold for investment.

    Typically when you purchase precious metals, you buy it by the Troy Ounce. When you hear about the spot price of gold or silver it is always quoted per ounce and each and every country or region has a specific price that will be listed on a daily basis.

    In Japan you have a Tocom Spot Price and in London you have what is known as the London Fix. In the morning they will fix the price and in the evening they will fix the price. When the London markets close, the market price turns over to the New York spot price and that will trade until approximately 4 o'clock New York time and then we start to trade once again in Asia. So precious metals actually trade 24 hours a day around the world, but their prices are always quoted in dollars and in ounce.

    When you purchase precious metal from a dealer, normally the price that you see is the spot price which is quoted on the television or some times in the paper. No one buys gold at the spot price. If you are interested in buying a gold bar you pay a small premium above the spot price. If you are interested in owning a gold coin you pay a little higher premium above the spot price. The spot price is like the mid point between the ask price that a dealer will charge and the big price that a dealer will pay you for the actual gold.

    When buying coins, normally you pay somewhere between a three and a half to four and a half percent premium above the spot price to buy and when you sell them normally you get approximately a 1% premium above the spot price to sell. That's how the dealers actually price their products. So now you understand the basics of how precious metals are priced and sold in the market place.