Why are gold coins and bars more expensive than the price of gold?

Question

Accepted Answer

Gold coins and gold bars are priced above the gold spot price because producing, trading, and distributing these products involves additional costs. Private investors typically buy weights ranging from 1 gram to 1 kilogram, while the gold price (also known as the spot price) is based on large wholesale bars of 400 troy ounces (approximately 12.4 kilograms), known as Good Delivery bars. These 400-ounce bars are traded between banks and institutional investors and stored in professional vaults, such as those associated with the London Bullion Market Association (LBMA). The spot price therefore represents the wholesale price of gold.

The following factors explain the price difference:

Manufacturing costs: Melting, casting, refining, and polishing gold into small bars and coins incurs additional costs, which are added on top of the gold spot price.
Sales and distribution costs: The retail price also includes costs for marketing, packaging, transportation, and insurance.
Supply and demand: When demand for physical gold is high and supply is limited, premiums above the spot price may increase.
Quality and certification: Coins and bars with superior finishing or official certification (such as those from LBMA-approved refiners) are more expensive to produce and therefore sold at a higher price.

In summary: Gold coins and gold bars are more expensive than the spot price because they are produced and traded in smaller weights. Additional costs for production, distribution, supply, demand, and quality result in retail prices that are higher than the international gold spot price.

Learn more about the difference between gold bars and coins.
Learn more about the gold spot price.

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