Precious metals and the concepts behind their pricing can be a confusing topic. Yet knowing all of the details about the trade of precious metals can help you understand the value of metals, when to buy and sell them, and a comprehension of how they make a worthwhile addition to your portfolio. Whether you’re adding precious metals to your wealth management strategy or you just want to gather more information before you invest, here are some answers to common questions about precious metals.
Spot pricing describes how much a commodity is worth currently, including the transport and general transaction of the product. For example, the spot price of an ounce of gold could be $1,700 on the markets open on Friday. However, the price can fluctuate for any number of reasons, as well as with supply and demand. Spot pricing is the same for silver, or any other commodity that is traded daily, and it may have an impact on the price or value of futures contracts for precious metals.
What Does Premium Over Spot Mean?
Premium over spot is the term used to describe how precious metals are bought and traded and essentially translates to an added extrinsic value. The spot price is how much a certain precious metal would cost at face value, but that’s not how much it would cost to trade the metal itself. While trading metal at face value/spot price sounds intriguing, things like brokers, fabrications, and distributions will affect the price of a trade, as well as numismatic value or the rarity or collectability of the item.
Premium over spot describes how much the secondary factors of trade will affect the overall price of the trade. To successfully profit in the precious metal market, it is necessary to know spot price and premium over spot whenever possible.
Is Premium More Based on Precious Metal Type?
Premium is more based on the cost of fabricating and selling precious metals. In addition, supply, demand, inflation, and global trends will also affect the premium.
Premiums on gold will often be higher than a premium on silver, simply because the demand and want for gold is far higher than it is for silver. Palladium and platinum may also carry a higher premium than either silver or gold simply do the demand and relative rarity of the two metals.
When Is the Best Time to Buy Precious Metals?
Buying precious metals like gold and silver is like buying any other type of commodity; the market is frequently fluctuating and changing. However, adhering to simple principles can increase the chance and opportunity for profitability.
Historically, the best times to buy precious metals are from January to March and throughout the month of June. Timing is key to the short-term trading of precious metals, so you’ll also have to identify upward and downward trends to maximize your profitability. However, this doesn’t mean you need to liquidate your entire portfolio during each trade.
Strategies will vary depending on your goals. If your goal is to make quick cash, use a more aggressive strategy than you would if your end goal was to build long-term wealth. You can also use precious metals as a hedge against inflation or overall market volatility.
Understanding Is the First Step Toward Success
While the language used and the pricing of precious metals can be a challenge to understand at first, doing so can make metal trading a cinch. A bit of practice makes perfect, and the more you apply these ideas to real-world information, the more likely you’ll become a successful precious metals investor or trader.
London Coin Galleries of Newport Beach is a reputable Orange County coin and precious metals dealer. We can help you buy, sell or trade any precious metals, coins, antiquities, and artifacts you have. Our experience and service for the past multiple decades speak for itself. Book an appointment before coming into our gallery in order to ensure we give you the appropriate time needed for your particular situation.