November 28, 2018 If 1 ounce of gold is $1225, and 1/10 oz of gold is $122.5, and 1 ounce of silver is $14.41, what percentage does $2 premium on each coin represent? If one ounce of gold is $1225 at spot plus $2 cost, you should expect to pay $1227, a 0.7% premium. If the 1/10 oz of gold is sold at spot plus $2 cost, you should expect $124.5, 1.6% premium If 1 ounce of silver at spot is $14.41 plus $2 cost, you should expect to pay $16.41, a whopping 12.2% premium! Here are a few things we can learn from these calculations: 1. Bullion costs money to manufacture. These costs can never go away. Mints and private bullion sellers must always charge a premium of some kind to make back the money it costs to mint, ship, and market their product. 2. Knowing this, the greater bullion value a single coin has, the less of an impact the manufacture cost will have on the price of that bullion. Consequently, because gold is worth so much more than silver, buying gold bullion will always be a better deal than buying silver bullion. 3. However, when the price of silver rises, the premium you pay should fall. If the cost of manufacture is fixed, it will represent a lower percentage of the price of a coin if the metal inside that coin is worth more. For instance, if silver rises to $18 an ounce and is sold at spot plus cost for $20, you are now paying a 10% premium. If silver rises to $48 and 1 oz bullion then sells for $50, you are paying only a 4% premium. But when silver is cheap, as in 2018, you should expect to pay a much larger percentage premium. Knowing that, how does this impact your bullion buying? Some people may use this information to not buy silver unless silver is high. Some people may use this information to buy silver only in large quantity, such as kilo bars. Some may use this information to buy only gold. What do you do?