I'm a newcomer to investing in physical PM, and fortunately built the foundation of my modest stack in early January, before the current upward surge ($1270+ as I write this). My first annoying noob question for you veterans: Why do the various bullion dealers cite spot prices that are different from each other and from Kitco? Comparing them when the market is closed and all "ask"prices have not moved in awehile, the dealers seem to claim a spot price a few dollars above Kitco in the case of gold and a few cents in the case of silver. What is the "real" spot price of gold? Appreciative of your help.
Spot has a differential based on when markets are opened or closed, time zone, local supply etc. They are usually within a whisker, but it some respects meaningless as each item has a premium that the supplier chooses to implement.
No "real" spot price per se. http://forums.silverstackers.com/topic-37737-what-spot.html They might also refresh their prices at different intervals too which could have a slight effect. I think the extra few dollars on top is a bit of arbitrage to cover them in case the price has dropped upon the market opening. Never noticed it so never gave it any thought.
Thanks for the link to the 2013 thread. As for the "few dollars of arbitrage," I didn't realize dealers could do that and call it "spot price." What a noob. They appear to give themselves varying little bonuses on top of spot, I suppose to claim a smaller premium. Learning every day.
This might help http://research.perthmint.com.au/2015/04/07/how-are-gold-and-silver-spot-prices-determined/ Asking what the "real" price of gold is, is like asking what the real price of an apple is - there is no real/fair price because there is no centralised trading exchange, everyone charges what they want and competes and its up to you to find the best deal.
You will notice that Perth Mint Bullion includes more than a 'few dollars' of arbitrage in their quoted 'ask' price. As a compete n00b a few years ago I took PM's price for spot, til I realised it definitely isn't! As I type, PM ask is $1753.62 and Kitco is quoting $1742.51, a difference of.............. $11.11 -spooky!
Above post is what I'm referring to. Not trying to criticize any dealer that pads the spot price, maybe it's an accepted practice. Simply seeking education. To the post above that one: No, not the real price of gold. The real spot price. I had thought there was one set of bid and ask prices determined by the global market, converted to various currencies. What I'm learning here is that there is no "one" spot price, and perhaps also that spot price is whatever the dealer says it is? I am not equating spot price to going shopping for bullion. Obviously look for the best deal regardless of claimed spot. Purely looking at the mechanics of why various sites claim different spot prices at a given moment. For example, JM Bullion and Provident, both located in Texas, cite different spot prices at the same moment in time. If they use different sources, why so and why are the sources different? It's an academic question, not a "where do I get the cheapest ASE" question.
Are you looking at Kitco's bid or ask, what is their spread between bid and ask? Right now this is the spread in our depository online https://www.perthmint.com/storage/depository-online.html And a common trick is for a dealer to quote a really low "spot" price but then you find their premiums are higher and with freight etc it ends up being more expensive. BTW, the Perth Mint does not compete against its dealers on premiums, we stick at the recommended premium and you will generally find our dealers will quote a better price.
As Bron said above, there is no universal spot gold price. There are as many gold prices as there are markets and while they're all pretty close to each other, they're all chasing one another up and down as people try to buy cheap in one market and sell for more in another. The spot price any given dealer quotes you depends on all the people and organizations that feed their supply chain and every dealer has their own relationships with different suppliers. One dealer might buy direct from a national mint, whereas another might buy from a private mint in another country. One mint might buy on the spot market and another might use the daily fix price, which is basically just a snapshot of what the market was doing at a certain point in time when a lot of people wanted to trade (the fix price is basically irrelevant within minutes of it being set). The mints might also buy direct from miners, in which case they might deal privately. Or they might buy scrap gold for way below the going spot price and sell cheap because they bought cheap and still make a healthy profit. In a lot of cases, the dealers are simply quoting you the price their supplier quotes them.
Thanks for the clear explanation. I wonder, though, if some dealers use whatever spots best assist their pricing strategy.
OK thanks I'm still not out of noobland.. I was referring to the goldprice.org price as fed to SS forum (looks just like the Kitco charts I see posted here but maybe not the same source..). This seems to be generally accepted on here as 'spot' and I assume it represents a mid-market figure. Generally the discrepancies between the different spot prices quoted don't seem so big, but $11 seems a big difference - at least until I realised PMB's is an 'ask' price for physical metal. BTW the spread into you posted for the Depository - can I access that somewhere? Didn't see a link on the main page you linked. But the tightness of the spread makes it look very attractive (Update: I have created an account, presumably the pricing will be visible once it goes live).
