Premiums on Gold Coins & Bars
The Simplest Way to Compare Prices of Gold
On most of our gold bullion pages we give a table showing the 'premium' for various coins in different quantities. We believe this is often the quickest, easiest, and most meaningful way to compare the prices of different gold coins. Most of our competitors do not show the premiums on their website. This makes it hard for people to "shop around" for the best deal.
What Do We Mean by 'Premium'
A premium is simply the amount over and above the value of the intrinsic gold content, expressed as a percentage, so that if gold were £1,000 per ounce, a 3.25% premium on Krugerrands would mean a price of £1,032.50. It would also be possible to state this as a premium of £32.50, because a premium can be an actual amount as opposed to expressing it as a percentage, but in our experience, expressing premium as a percentage is the more useful method. To discover more, watch our How to Calculate Premiums on Gold Coins video.
Compare Prices or Compare premiums?
It is better to look at premiums rather than the price because gold and silver can be quite volatile. At a gold price of £1,000 per ounce, could you tell whether a sovereign was a better buy than a Krugerrand if the price of the sovereign was £259? It's quite difficult isn't it? What about a French 20 Franc priced at £200?
If you look at the percentage premium over the gold content, it is quite easy to compare, and this is why our pages contain references to 'premium'. To answer the questions we just posed, here is a table showing the answers, all calculated assuming a spot gold price of £1,000:-
Proof and Commemorative Coins Carry Higher Premiums - Usually...
For obvious reasons, specially produced proof and commemorative coins and sets tend to command higher premiums than mass produced bullion coins. When they are first released, for example, the mint's production costs are higher, and its selling prices need to be higher also. If the resulting coins are more desirable for whatever reason, then they will tend to retain a higher premium than bullion coins in the long term, even though their initial premium may decline.
...But Not Always...
It does not always follow that proofs are always at a higher premium than bullion coins. Some proof and commemorative issues get "forgotten". Perhaps because they are over-marketed when new, they become overbought, and there can be times when there is a market glut of one or more special issues. These can sometimes for a brief period of time, be bought for little more than bullion coins. We sometimes find it difficult to understand why, but we think that this can be due to investor laziness or blindness. Somebody perhaps reads in an investment guide that Krugerrands are the best buy, which is reasonable general advice, and will then ignore hard facts and figures, and reject or ignore other gold coins which may be offered at a lower premium because they are afraid to rely on their on intelligence rather than received wisdom. In other cases, it may be that an investor is too lazy to make calculations about the intrinsic gold content of a sovereign or some other coin, and therefore sticks to "one ounce" bullion coins instead.
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