As an investment, gold bullion coins and bars can be bought for very close to the often quoted, spot gold price. The spot price of gold means the current price at which a Troy ounce of gold is selling on international exchanges. The major exchanges for trading in precious metals are located in New York, Chicago, Sydney, Tokyo, Hong Kong, Zurich, Frankfurt, Paris and London, making the real time spot price of gold available 24 hours a day.
When buying an ounce of gold one must take into consideration that the bullion dealer's expenses and profit margin will be added to the spot price. In general, a normal trading range for gold will be between 5% and 15% above the spot price to the buyer. On the other hand, when selling gold to a dealer one can expect to receive about 5% below the spot price. Excluding gains and losses due to spot price fluctuations, there is only about a 1% to 2% per transaction profit for the dealer.
The price of bullion bars and coins can be influenced by many factors besides the spot price. Obviously, gold production costs contribute significantly. Exploration, mining, refining and transporting costs must be factored in. Who produces the gold bullion coins and bars affects the price. The reduced risk associated with purchasing from well known and reliable sources is a characteristic for which many investors are willing to pay a premium.
The price of a gold coin or bar is influenced by its size. We all understand that it costs less to produce and distribute a single 1 ounce bar compared to making and transporting four quarter ounce bars or ten 1/10 ounce bars. It is important to note that the physical size of coins with matching gold content can differ. Gold coins from different sources can weigh the same while differing in diameter and thickness.
Other impacts on cost include supply and demand. If there is an inadequate supply of coins and bars then investors must compete against each other when buying. Their design is something else that effects coin demand because more popular motifs sell better.
Advertising by the various coin producers has been shown to enhance the demand for their particular gold bullion coin. The Krugerrand became the most popular and best known one ounce gold coin in the United States in 1975 as a result of a massive marketing campaign.
The scarcity of coins due to either age or limited production is another factor in the cost. For example, by limiting their gold coin mintage, some countries try to enhance the collectors' value of the coins.
Just like with real estate or securities, knowing what is influencing prices enables investors in gold to be more successful.
Author Resource:-
Rayce Banner is a freelance writer specializing in financial subjects. Now that you have gotten some ideas and concepts that can be applied to investing in gold and other precious metals, go to Buy Gold to discover why it is one of the most active gold markets on the Web.
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