You can look up the price of gold on your phone right now. Four seconds. There it is, down to the dollar.
Then you call a dealer, and the number on the invoice is a different number. Sometimes a little different. Sometimes different enough that you would have put the phone down if anyone had shown you the gap in writing first.
Nobody shows you the gap.
Before I go any further, you should know that I sell precious metals. I also plan retirement income, and some of the people I plan for own metals. So I am not a neutral party and you should not read me as one. Every test I am about to hand you, apply it to me. If I cannot pass it, do not buy from me.
What the number on your phone actually is
The price you looked up is the spot price. That is the wholesale price of the metal in the global market, before anybody adds anything to it.
That price comes out of the paper market. Futures contracts and exchange-traded funds, which are funds you buy like a stock that track the metal’s price without putting metal in your hands. Enormous volume moves through there every day, and it sets the headline number that ends up on your screen and in the news.
You are not buying that. You are buying a coin or a bar that somebody had to refine, mint, insure, ship, store and stand behind. Physical metal almost always trades above the paper price. That is not a scandal. That is what it costs to turn a number into an object you can hold.
What is worth arguing about is how far above that wholesale price your dealer sits, and whether anybody puts the figure in front of you before you sign.
The spread, and the word underneath it
A spread is the difference between what a dealer pays for a metal and what they charge you for it. Every dealer has one. A dealer without a spread is a charity, and I have never met one.
It is easier to see if you stop calling it a fee. The grocery store does not charge you a fee on a gallon of milk. The store bought the milk for less than it sold it to you for, and that difference is how the lights stay on. Maybe there is a store two towns over selling it for forty cents less. Maybe their parking lot is worse and they are out of everything else you came for. You pay the two bucks and you drive home.
Your metals dealer works the same way. They buy wholesale, they sell retail, and the difference is where the business lives. In most cases the dealer is not taking a percentage of your holdings every year the way a portfolio manager does. They make their margin once, on the day you buy.
Here is the part almost nobody explains, and it is the most useful thing in this article.
There are two ways to describe that same margin, and they produce very different looking numbers. Markup measures the dealer’s margin against what the dealer paid. Spread measures it against what you paid. A one hundred percent markup is a fifty percent spread. Same coin, same dollars, two numbers that sound nothing alike.
Ask for the spread. It is the one that tells you something you can use, because it tells you what the metal in your hand is worth right now. At a fifty percent spread, you handed over a dollar and you are holding fifty cents of metal.
One more thing before the arithmetic. Not all of the gap belongs to your dealer. A coin struck by a national mint carries the mint’s own premium over the metal inside it, and your dealer paid that premium before adding a dollar of their own. The wholesaler in between takes a cut too. That matters when you are judging whether a price is fair. It does not change where you are standing the next morning, because you have to make back the whole gap, not just the part that annoys you.
Here is the arithmetic, since nobody else will do it for you
These are round illustrative numbers, not a quote and not any dealer’s actual pricing. Run your own version with your own figures.
Say you spend $10,000 on gold. You pay, the bar arrives, you put it somewhere safe.
At a five percent spread, you are holding $9,500 of metal.
At a twenty percent spread, $8,000.
At a forty-five percent spread, and I have seen worse than forty-five, $5,500.
That is the entire calculation. Multiply, do not divide. Whatever the spread is, that share of your money did not buy metal.
Now the part that matters more than any of it. The morning after your purchase settles, common bullion is worth the metal inside it. Nobody pays you a premium to buy back ordinary bullion. So the price of the metal has to climb before you are back where you started, and it has to climb by more than the spread.
At a five percent spread, gold has to rise a little over five percent for you to break even.
At twenty percent, it has to rise twenty-five percent.
At forty-five percent, it has to rise about eighty-two percent.
Read that second column again, because it catches people. The recovery is always bigger than the spread. If twenty percent of your money never bought metal, the eighty percent that did has to grow by a quarter just to get you back to level.
You can be right about gold, right about silver, right about every reason you bought, and still sit underwater for years because of a number on page two of a contract you signed at your kitchen table.
Proof and collectible coins are the exception to that check, and not in the buyer’s favor. They carry a premium going in and a premium coming out, so the spot price on your phone will not tell you whether what you are being charged is fair. You are buying two things at once, the metal and the collectibility, and only one of them has a public price. If someone is steering you there, ask what you are paying for each.
If you buy inside a retirement account rather than outright, a custodian and a depository each charge an annual fee for administering the account and storing the metal. Ask for both schedules in writing. Next to the spread they are small. The spread is the number that decides how you do.
That is the gap. It is arithmetic, not opinion, and you can check every line of it on the back of an envelope.
Two red flags, and the first one is most of the game
If a dealer does not publish live prices on their website, walk away.
I do not care what the excuse is. I have heard all of them. Market volatility, custom pricing, we quote by phone because every client is different. It is nonsense. A company willing to stand behind its price puts the price where anyone can see it, including the competitor down the street. A company that will not is telling you the price depends on who is asking and how frightened they sound.
That one flag catches most of what you need to catch.
The second one takes ten minutes. Go to the Better Business Bureau and find the company. Do not read the reviews. There is a separate tab for complaints, and almost nobody clicks it. Read the complaints.
Do not look for a dealer with zero complaints. Any business doing real volume has complaints, because nobody keeps everybody happy. You are not counting. You are reading for a pattern. If complaint after complaint says some version of I sent them a hundred thousand dollars and now I have thirty, that is your answer, and it is the only pattern that should frighten you.
Do not let a resolved tag talk you out of it either. Resolved does not mean the customer was made whole. It means the business responded and the customer either accepted the response or never wrote back. The complaint itself stays exactly as the customer wrote it. Read what they wrote.
Where I will defend my own industry
Once you have picked a dealer who publishes prices and has clean complaint patterns, stop shopping.
If a company walked you through the process, answered the phone every time you called, and got the metal to your door, and then you find one two dollars cheaper somewhere else on the day you sign, you are not driving a hard bargain. You are taking that work for free. Silver has moved more than six percent in a single day. Your two dollars will get swamped by ordinary market movement inside a week, and the people who earned your business will have earned nothing.
Fair pricing is a standard you set before you choose. It is not a hammer you pick up afterward.
What a receipt looks like here
You do not need to trust anyone in this business, mine included. Every number you need already exists in writing somewhere. It is just scattered on purpose, so ask for it in one place.
Before you sign, you should be holding the dealer’s published price for the exact product on the exact day, the invoice showing precisely what you are buying and what you are paying for it, and the spread on that product, stated as a spread and not as a markup.
Then take two minutes and do the thing nobody expects you to do. Open the spot price on your phone, look at the invoice, and work out the difference in dollars. Not in percent. In dollars, the way you would look at a grocery receipt in the parking lot before you drive off.
If the gap is reasonable, you have bought well and you will never have to wonder again. If the gap makes your stomach turn, you have just saved yourself years.
And if the person on the other end of the phone does not want you doing that math before you sign, you have learned everything you needed to learn about that person.
Common questions
What is the spot price of gold?
It is the wholesale price of gold in the global market, set largely by futures and fund trading, before any dealer adds a markup. It is the number quoted in the news.
What is a dealer spread?
The difference between what a dealer pays for the metal and what they charge you, measured against what you paid. At a twenty percent spread on a $10,000 purchase, you are holding $8,000 of metal.
What is the difference between a markup and a spread?
They describe the same margin against different starting points. Markup measures it against the dealer’s cost, spread against your purchase price. A one hundred percent markup is a fifty percent spread. Ask for the spread, because it tells you what the metal in your hand is worth today.
Is paying a premium over spot normal?
Yes. Physical metal costs more than the paper price because it has to be refined, minted, insured, shipped and stored, and the mint, the wholesaler and the dealer each take a piece along the way. A premium is expected. The question is how large the total is and whether it was disclosed before you signed.
How do I know if I am overpaying for gold or silver?
Compare the dealer’s invoice to the spot price on the day of purchase and work the difference out in dollars. Then check that figure against dealers who publish live prices on their websites.
How much does gold have to rise before I break even?
By more than the spread you paid. At a five percent spread, a little over five percent. At twenty percent, twenty-five percent. At forty-five percent, about eighty-two percent.
Does the spot price check work for proof and collectible coins?
No. Those carry a premium both when you buy and when you sell, so comparing them to spot will not tell you whether the price is fair. They are priced as collectibles as well as metal, and only the metal has a public price.
What is the difference between paper gold and physical gold?
Paper gold means instruments like exchange-traded funds that track the metal’s price without you holding metal. Physical gold is the coin or bar itself, with its own premiums, storage and resale realities.
What should a metals dealer show me before I sign anything?
Published pricing for the exact product, an invoice itemizing exactly what you are buying, and the spread on that product stated as a spread.
This is general information, not personalized financial advice. Your situation, your tax position and your timeline are your own, and decisions about retirement assets should be made with a qualified professional who knows all three.
