Gold and silver premiums: definition, calculation and examples
By Maxence Roux· Published on · Updated on
Gold prices are quoted everywhere, but a coin’s dealer price is almost always different. That difference is the premium. Here is how to calculate it and why it varies.
Gold prices are quoted everywhere, but a coin’s dealer price is almost always different. That difference is the premium. Understanding it helps avoid surprises when buying or selling.
What is a premium?
The premium is the difference between the price of a coin or bar and the value of the pure gold or silver it contains. It is expressed as a currency amount or as a percentage of the metal value.
Premium (%) = (coin price ÷ value of the metal content − 1) × 100
How do you calculate the metal content’s value?
Metal value = fine weight × price per gram Fine weight = gross weight × fineness ÷ 1,000
Gross weight is the coin’s total weight, and fineness is its purity in parts per thousand. For example, a 20-franc Napoleon coin weighs 6.45 g with a fineness of 900 ‰, giving a fine weight of 6.45 × 900 ÷ 1,000 = 5.805 g of pure gold.
Worked example (fictional values)
For simplicity, assume a gold price of $100 per gram. This figure is chosen for the example; it is not a real market quote.
- Metal value: 5.805 g × $100 = $580.50
- Dealer’s asking price: $640
- Premium: (640 ÷ 580.50 − 1) × 100 = approximately 10.25%
The premium is therefore $59.50 above the metal value.
Buying and selling: two different prices
A dealer quotes two prices for the same coin.
- The purchase price: what you pay to buy the coin.
- The selling price: what the dealer pays you to buy it back.
The first is higher than the second. The dealer takes a margin, and the premium differs on each side. In our example, if the dealer buys the same coin back for $570, the buyback price is 1.8% below the metal value, and the gap between purchase and buyback is $70. You must recover that difference before making a profit.
Why do premiums vary?
- Minting, transport and distribution costs.
- The dealer’s margin.
- Size: in percentage terms, a small fractional coin (1/10 troy ounce, for example) generally has a higher premium than a one-ounce coin, because fixed costs account for a larger share.
- Demand: premiums can increase during periods of strong demand.
- Collectibility: some old or rare coins sell well above their metal value.
- Taxes: France exempts investment gold from VAT, while silver and platinum are generally subject to 20% VAT. This is a French rule, not a US tax rule. Check the taxes applicable where you buy; compare prices on the same tax basis.
What to check before buying or selling
- Compare the price with the metal value on the same day.
- Ask for both the purchase price and the buyback price.
- Check whether the quoted price includes applicable taxes.
- Compare several dealers on the same date and for the same coin.
Premiums and real profit
The premium paid when buying and the discount when selling reduce your profit. To calculate what you really earn, read our article “Gold and silver: how to calculate your real profit”.
Calculate with Metalstat
In the Metalstat calculator, you can enter your own premium for a coin. The default is 0%, meaning the metal value alone.
This article provides general information and is not investment advice. The example figures are fictional.