How Gold Premiums Work: The Gap Between Metal Value and Price
Every gold purchase costs more than the metal in it. Understanding what that gap pays for is how you tell a fair price from a bad one.
The premium is everything between the value of the metal and the price you pay. On bullion it covers refining, minting, packaging, shipping and a dealer margin. On jewellery it covers all the design and craft work as well, which is why it is so much larger.
Key takeaways
- Premium equals price minus metal value. It is not hidden, it just is not itemised.
- Bullion premiums are small. Jewellery premiums are large.
- Smaller items carry higher premiums per gram, because costs are charged per piece.
- You also pay a spread when selling, so the round trip costs more than the premium alone.
- Compare real quotes rather than trusting any published rule of thumb.
What Vanhess does and does not do
Vanhess is a jewellery shop in Coquitlam, British Columbia. We sell solid gold jewellery. We do not sell bullion, bars, coins or wafers, we do not buy or broker investments, and we are not financial advisors, tax advisors or a bullion dealer. Everything on this page is general information to help you understand how gold is priced and valued. It is not financial, investment or tax advice. Speak to a licensed advisor or an accountant before making a decision about your money.
What the premium is actually paying for
| On a bullion bar or coin | On gold jewellery | |
|---|---|---|
| Refining to purity | Yes | Yes, plus alloying to the karat and colour |
| Forming | Casting or striking | Casting, drawing, assembly, soldering |
| Finishing | Minimal | Filing, polishing, plating, stone setting |
| Packaging | Assay card or capsule | Box, pouch, presentation |
| Distribution | Insured shipping and dealer inventory | The same, plus retail premises |
| Margin | Dealer margin | Manufacturer margin and retail margin |
| Relative size | Small | Large |
Why small costs more per gram
Almost every cost in that table is charged per item rather than per gram. Minting a 1 gram bar involves nearly as much handling as minting a 100 gram bar. Spread over a hundredth of the metal, that cost per gram is a hundred times higher.
The same logic applies to jewellery. A delicate chain takes more labour per gram than a heavy one, so the metal is a smaller share of the price.
Be careful
We have not found an authoritative published dataset for Canadian dealer premiums, so this hub does not quote a percentage. Any specific number you see on a retailer's page is that retailer describing its own pricing. Compare actual quotes from more than one seller instead.
The round trip is what matters
Focus on the total cost of buying and later selling, not just the buying premium. You pay above the metal value going in and receive below it coming out. That combined gap is the real cost of owning the metal for a period, and the gold price has to move by more than the whole gap before you are ahead.
Worth knowing
A useful question for any seller: what would you pay me for this exact item today? The gap between their sell price and their buy price tells you more about their pricing than any advertised percentage.
Frequently Asked Questions
What is a gold premium?
It is the difference between the value of the metal in an item and the price you pay for it. It covers refining, manufacturing, packaging, distribution and margin. On bullion it is relatively small. On jewellery it is much larger, because it also covers design, craft labour and retail costs.
What is a fair premium on gold?
We have not found an authoritative published dataset for Canadian dealer premiums, so we do not quote a figure. The reliable method is to work out the metal value of the specific item and compare the asking price against it across more than one seller. That comparison is worth more than any rule of thumb.
Why do gold jewellery premiums seem so high?
Because you are buying skilled work as well as metal. Alloying, casting, assembly, soldering, finishing, polishing and any stone setting are all labour, and on a detailed piece those hours can exceed the value of the gold itself.