Have you ever noticed that two gold coins containing the same amount of gold could be sold at a different price ? This is explained by the premium, an important criteria when looking to invest in gold by buying coins. Explanation in this article.
The Krugerrand, Maple Leaf, $ 50 Eagle: these three parts contain the same amount of fine gold (1 oz). Yet their prices differ. Why ?
Le Krugerrand, la Maple Leaf, la 50 dollars Eagle : ces 3 pièces contiennent la même quantité d’or fin (1 oz). Pourtant leurs prix de vente diffère. Pourquoi ?
What is the gold coin’s premium ?
The premium of a gold coin is simply the difference between the price of a gold coin and the value of the metal it contains.
It is therefore the amount added over the value of gold that contains the coin. A piece of an ounce of gold can therefore cost – for various reasons – more expensive than other room also containing an ounce of gold.
Example 1 :
A Maple Leaf contains one ounce of fine gold (31,103g). If the gold price is at 1060 $ and the coin is sold at 1110,5 $, so its premium is :
1110,50 – 1060 = 50,5 $ so a 5% premium.
A 50 dollars Eagle contains also one ounce of pure gold. But if it’s sold at 1100 $, so its premium is less important !
1100 – 1060 = 40 $ so a 3,96 % premium.
Example 2 :
A french gold 20 Francs Napoleon contains 5,81g of pure gold. On calcule ainsi la valeur en or que la pièce contient de la façon suivante :
Calculation of the gold price per gram = gold spot price per kilo / 1000
so 34 130 $ / 1000 = 34,13 $ per grams of fine gold.
34,13 $ x 5,81g = 198,29 $
If the sell price of the french gold 20 francs napoleon is at 205,03 $, so the premium of the coin is :
205,03 – 198,29 = 6,74 € so a 3,4 % premium.
Where the premium gold coins come from ?
The additional premium on gold coins comes from many factors.
Going back the chain of designing a piece of gold, we understand that it added additional amount comes from the manufacturing costs of the currency shop that struck gold coin. This is particularly the case with recent pieces of an ounce.
But the premium is not always necessarily due to the facts set a little higher. Because some parts such as Napoleons, 20 francs Mariana Coq Vrenelis or are no longer minted and built!
At that time, the premium is due to the law of supply and demand. The level at which a gold coin is available (supply) relative to its popularity and the number of people wishing to buy (demand) and directly influences the price which will be sold various pieces of gold on the market, although they contain the same amount of fine gold !
Why premium is an important criteria when you want to buy gold coins ?
Depending on the economic situation and market conditions, the amount of a specific piece of gold in the market compared to the demand for gold coin in question can have a profound impact on the premium of the room. An unusual request for a piece of gold in particular can push the premium of the gold coin up sharply compared to other similar gold coins.