“Spot” or “Spot Price” is the paper market price of the COMEX (The Commodity Exchange Inc.), for a given commodity such as gold, silver, copper, platinum, steel, etc. This paper price is the buy and sell price between people, nations and companies. Most use these paper contracts to hedge against price volatility, so physical metal transfers happen infrequently. Since the futures market is widely available and recognized, this is the base price most will reference when buying or selling precious metals.

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Spot Price Isn't True Value

Spot Price isn't the true value of the metals. These paper contracts are leveraged multiple times between multiple parties. You can easily have hundreds of paper contracts all laying claim to the same 1000 ounce bar of silver or 100 ounce bar of gold. The reason this scheme works is because most who try to take physical delivery will be denied and forced to be closed out in cash. Those who wish to purchase smaller denominations of precious metals will pay a premium over spot price.

Explanation of Premiums

Premiums are the extra costs added on by mints and retailers. These costs include minting the bullion, shipping, insurance and overhead costs. Demand and popularity of specific products also factors into this. If you're buying bullion as an investment, hedge against inflation or a similar reason, you will want to purchase as close to spot as possible, to maximize the quantity you can purchase.