When you buy a gold bullion coin or bar, the price may include markups for distribution, fabrication, nominal dealer fees and any numismatic or collector value, in addition to the silver spot price.
What is the premium ?
The premium refers to the additional cost charged above the gold spot price. The premium is attributed to the manufacturing costs, handling, packaging, insurance and delivery.
Premiums are unavoidable since even a bullion dealer have to buy gold above the spot price. However, reputable bullion dealers such as Gerrards charge investors very small percentage premium.
How to buy gold at low premium ?
The most cost-effective way to buy gold at the lowest premium possible is to buy gold bars. Because of their larger unit size, gold bars are cheaper to produce. Their manufacturing costs is reflected in their prices. Therefore, gold bars attract a smaller premium compared to gold bullion coins.
However, if you want to buy gold at the lowest premium above spot, large gold bars are a great chocie. To illustrate, it is cheaper to buy 1 kilo gold bar than to buy 10 x 100g gold bars. Although the 2 options contain the same amount of gold, you will save around 1% on your investment, a fairly substantial saving of approximatively £350. That’s a great option if you plan to invest for long term and have no intention to sell part of your gold bullion overtime.
However, bear in mind that you will have to sacrifice the liquidity of your precious metal portfolio. This small saving will result in a lack of flexibility.