Buying And Selling Gold As A Beginner? Know The Following Terminology
Are you planning on buying and selling gold for investment purposes, but don't know a bunch about it? If so, you'll want to know the terminology that is used for buying and selling precious metals.
Spot, Bid, and Ask
One term you'll frequently hear is the spot price of gold. This is referring to the real-time price that raw gold is selling for, which is based on current supply and demand and can change by the minute. As demand increases and gold is in low supply, the spot price is going to increase as a result.
However, the buying price and selling price are defined with two different terms. The bid price is what buyers are willing to buy gold for, and the ask is the price the gold seller is willing to sell for. The bid and ask price will depend on the form of the gold that is being sold, the weight, and any premium that is associated with it.
Precious metal pricing will include a premium, which is a price you pay in addition to that spot price based on the type of gold you are buying or selling. The premium will vary, with some forms of gold having a higher premium than others. Any product that is made by a gold refiner will have a low premium, while coins issued by the government are going to have a higher premium. Both forms of gold may have the exact same amount and type of pure gold in them, but a gold coin will cost more due to the premium.
Another thing that can increase the premium of gold is its rarity. Government coins often have that high premium because certain coins are more scarce than others. For example, a coin from a certain year that is limited in quantity can have a very high premium associated with it.
Weight, Purity, and Fine
The weight of gold is measured in troy ounces, which is different than the type of ounce that you are likely familiar with. A gold coin's purity is measured in karats, which is similar to the karats used to define the purity of jewelry at a local jewelry store. However, purity can also be described by how fine the gold is. A gold coin that is described as being .9 fine means that it is 90% pure gold.
There are just a few terms that you'll need to know as you get into buying and selling gold.