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I'm learning about investing in precious metals. I know that when you buy gold or silver bullion from a dealer, you typically pay the dealer a commission above the spot price. I'm working from an understanding of spot price based on Investopedia's definition:

The current price at which a particular security can be bought or sold at a specified time and place.

I'm assuming that in the case of the "official" gold and silver spot prices, the "specified time and place" is some big exchange in New York or some other major city.

Is it possible for an individual investor to purchase bullion at or near the spot price by physically going to whatever exchange determines it? Or do you have to be a member of some elite group of investors to even gain access?

(I realize that traveling to New York or wherever would likely more than offset any potential savings. But if you happened to be there already...)

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    There are those who would say that "investing in precious metals" is an oxymoron. One can speculate in metals, but they are not an investment. Welcome to Money.SE. – JoeTaxpayer Jul 20 '15 at 23:02
  • In answering the title of the question, I found the closest to spot price you can get is ebay. There may be limited availability of the type you desire, but the "commission" is about the cheapest you will find. – Pete B. Jul 21 '15 at 13:30
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    You want delivery or just ownership ? If you want delivery no, but if you want ownership yes you can. – DumbCoder Jul 21 '15 at 15:59
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    @DumbCoder Physical possession, as a hedge against worst case scenarios. – Kevin Krumwiede Jul 21 '15 at 22:06
  • Remember, preparing for worst case has opportunity costs; you're giving up some of your opportunity to benefit from better cases. Unless you really think the worst case is likely, this may be a bad bet. And in a true worst case, food and tools and knowledge may be worth far more than lump of metal, no matter how pretty or scarce it is. – keshlam Sep 11 '15 at 23:59
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There are various exchanges around the world that handle spot precious metal trading; for the most part these are also the primary spot foreign exchange markets, like EBS, Thomson Reuters, Currenex (website seems to be down), etc.

You can trade on these markets through brokers just like you can trade on stock markets. However, the vast majority of traders on these exchanges do not intend to hold any bullion ownership at the end of the day; they want to buy as much as they sell each day. A minority of traders do intend to hold metal positions for longer periods, but I doubt any of them intend to actually go collect bullion from the exchange. I don't think it's even possible.

Really the only way to get bullion is to pay a service fee to a dealer like you mentioned. But on an exchange like the ones above you have to pay three different fees:

  • transaction fee to the exchange
  • transaction fee to your broker
  • the bid-ask spread if you want to buy immediately

So in the end you can't even get the spot price on the exchanges where the spot prices are determined. You might even come out ahead by going to a dealer.

You should try to find a reputable dealer, and go in knowing the latest trade prices. An honest dealer will have a website showing you the current trade prices, so you know that they expect you to know the prices when you come in.

For example, here's a well-known dealer in Chicago that happily shows you the spot prices from KITCO so you can decide whether their service fee is worth it or not.

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The futures market allows you to take delivery at the lowest cost. Most people don't deal in 100oz gold bars and 5000oz of 1000oz silver bars though, especially at the retail level. That said, when you are at the retail level, often times you will find reputable Internet dealers offering the lowest cost of ownership. Keep in mind brand name though when you're doing this. Reputable refiners/mints will often see higher premiums versus generic, and this does matter to some extent. Quantity and weights also matter in terms of pricing; the more you buy the lower the premium.

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