Spot Price vs. Physical

If you are new to the gold and silver game, you will likely look up the silver or gold spot price and assume that is the price of physical gold or silver.

Well if the world of silver and gold price discovery was legitimate and honest, that may be the case but I digress, for it is not.

The spot prices of either metal are an amalgamation, a composite of the world’s future’s markets buying and selling futures contracts representing the underlying metal respectively. The physical market for bullion tracks the spot price but generally hovers over it in the realm of reality where bullion dealers actually deliver what you buy. So the chain in general of price and bullion to one’s door goes like so:

➜ Miners dig silver and gold ore from the ground and sell mixed ore and dore metal bars to refiners typically below the world spot price for each metal.

➜ Refiners then melt and purify the ore into fine bullion, which is then sold to mints at very close to the spot price.

Mints then strike bullion coins or pour bullion bars, selling them to wholesale / retail silver and gold dealers at prices typically just above the spot price.

➜ Retail bullion dealers offer to the public their respective bullion products.

Time for a shameless plug for when you are ready to begin buying bullion (START HERE).

The next article in our Beginners’ Guide to Buying Physical Bullion will discuss which gold and silver products are right for you.

» Which Metal & Bullion Products Are Best For Your Needs?

All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.