Understanding a buyer's bid

The short answer

A bid starts from a reference price for the metal, is adjusted for the particular product and its condition, and leaves the buyer room for its costs and risk. Shipping, insurance, testing or payment fees may then come off. So compare bids for the same items, at the same time, by the net amount you would receive, not by the headline figure.

The reference: spot

Spot is the cash price for metal delivered immediately, quoted in dollars per troy ounce. A troy ounce is about 31.1 grams, a little heavier than the everyday ounce. The figures in the news reflect the wholesale market, where professionals trade large bars; they are not the price of a coin. Quote providers publish spot through the day, and benchmarks such as the LBMA gold and silver prices are set by auction at fixed times. When someone quotes you a percentage of spot, ask which reference they use, and as of what time.

Your product, not just your metal

• Fine content, not gross weight. A coin can weigh more than the pure metal in it. The one-ounce American Gold Eagle is 22-karat: it contains one troy ounce of fine gold but weighs 1.0909 troy ounces. The American Buffalo is .9999 fine and weighs one troy ounce. Fine weight multiplied by spot gives the metal value, sometimes called melt value, and it is the natural starting point for checking any bid.
• Product. Widely recognized coins and bars are usually easier for a buyer to resell than obscure ones, and bids reflect that.
• Quantity. Some costs are fixed per shipment, so a very small sale can lose proportionally more to them.
• Condition and packaging. For ordinary bullion, value rests mainly on metal content, and damage may push a bid toward the bare metal value. Proof, graded or “limited” coins are different. What you paid above the metal value depended on collector demand, and a bid may recognize little of it. In an advisory issued in 2020, the CFTC described collectible coins sold at premiums of 40 to 200 percent over spot, hard to value and not very liquid, with owners who needed to sell often offered a fraction of the original price.

Bid, ask and the space between

A dealer’s ask is the price at which it sells. Its bid is the price at which it buys. The gap between them is the spread. Regulators describe the same thing from the buyer’s side: a joint CFTC and FINRA bulletin notes that dealers sell above spot, buy back below it and set their own spreads, which is why comparing is worth the effort.

New coins also start life above the metal price. The United States Mint sells its bullion coins to authorized purchasers at the metal’s market price plus a small premium, and a retail buyer pays spot plus the dealer’s markup. When you sell, some of that premium may come back to you, or none of it.

So a fair bid can sit below spot, and well below what you once paid, without anything being wrong. It is also why it is worth asking any seller, before you buy, what it would pay to buy the same item back.

What comes off the bid

Ask for every deduction in writing: shipping and insurance, testing or assay, payment-method fees, and anything else taken before you are paid. If the metals are in an IRA, your custodian and depository may also charge the account for the sale. The number that matters is the net: the amount that arrives.

When the price is fixed

Two bids with the same figure can be very different promises. Ask each buyer:

• At what moment is the price fixed: when you agree, when the metal arrives, or after it has been inspected?
• How long is the quoted price held?
• What could change it, and what could not?
• When, and how, is payment made?

A worked example, with invented numbers

Every figure here is made up to show the arithmetic. None is a current price, a typical fee or anyone’s actual terms, and neither buyer is Aurstream. Suppose you have one-ounce coins of a common type, and on the same afternoon two buyers give you these terms.

The higher bid wins for ten coins and loses for two. And because Buyer B fixes the price on arrival, its figure would move with the market while your parcel is in transit, up or down. Neither buyer is better in general. They are offering different things, and only the net amount and the terms show which suits you.

A short checklist

Same items · same day and time · the reference each buyer uses · bid per item · every deduction · when the price is fixed and for how long · when and how you are paid · net amount.

If the metals are in an IRA

The bid is built the same way. What differs is who is paid and what the account is charged: see IRA metals: sale, distribution or custodian transfer?.

If you are thinking of selling

In Aurstream’s process, an indicative range comes first and is only an estimate. A formal quote states the exact amount and is valid for two hours, and accepting it within that time commits Aurstream to that amount for the agreed products and quantities. The valuation process explains those steps. You can still note what you hold, so that any bid you ask for, from anyone, is for exactly the same items.

This page is general education, not investment or tax advice.

Sources. CFTC and FINRA, 10 Things to Ask Before Buying Physical Gold, Silver or Other Metals, March 20, 2024 (finra.org; also published by the CFTC) · CFTC customer advisory, Beware of Gold and Silver Schemes Designed to Drain Your Retirement Savings, issued August 2020 (cftc.gov) · United States Mint, bullion coins and bullion coin specifications (usmint.gov) · LBMA, about the daily auction prices and guide to the London market: the price (lbma.org.uk) · NIST Handbook 44, Appendix C, units of measurement (nist.gov).