07 Jan 2024  Sergio Martin Rubio  4 mins read.


Precious Metals Valuation: Spot Price vs. Offer Price

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Introduction

Investors often use precious metals like gold, silver, platinum, or palladium to protect against inflation. Unlike money or stocks, which can be influenced by market feelings, these metals have their own worth. Plus, it’s hard for institutions to control their supply because mining capacity is limited globally.

Spot Prices and Their Role

The Spot Price is what markets usually use to value precious metals compared to regular money. Different institutions and exchanges, like the London Bullion Market Association (LBMA) or the CME’s COMEX exchange, affect the price of precious metals.

Spot prices are handy for comparing the prices of precious metals to other things like cryptocurrencies, regular money, oil, houses, or the stock market. This helps you see how they’re doing over time and decide if you want to buy them.

Spot prices change because of things like supply, demand, political events, or future trades. While they give you a quick idea of the least your portfolio is worth, they’re not exact for selling because they only show the value of the metal itself and don’t include things like taxes or extra charges.

You can also use the spot price to figure out your overall worth, which might have tax effects depending on where you live.

Offer/Reference Prices Explained

Offer or reference prices are what precious metals vendors or dealers show in their shops, and they change based on the live spot price of each metal. These prices are important for estimating how much your precious metals are worth because they include the premium and taxes. They give a better idea of how much you can sell your whole portfolio for, especially if you’re selling to other people.

Dealer offer prices and spot prices usually vary the most for silver and small pieces of metal, as they have a higher price compared to the premium. Selling 1 troy oz of silver at its melt value isn’t usually a good idea, especially in places where VAT or sales tax is added to silver. On the other hand, non-small gold bars usually have a smaller premium, so the spot and offer prices might be closer.

Still, the offer price usually shows a more accurate value of your portfolio, as that’s what people pay when they buy from a coin shop.

Calculating Portfolio Value using Both Prices

To value your portfolio using spot prices, visit a reliable website like Kitco and multiply the total weight of gold, silver, platinum, or palladium in troy ounces by their live spot prices. But it’s not so simple because factors like weight, purity, or wear affect the total metal content.

Likewise, you can calculate the value based on markup prices from your dealer. However, it’s tricky to track the quantity in ounces or grams for each metal. This gets even more complicated when dealing with different types of bullion, including fractionals or “junk metal”.

The solution is to use a tool that tracks your portfolio accurately.

Tool for Tracking Valuation: Precious Metals Manager App

The Precious Metals Manager app lets you easily track your precious metals portfolio wherever you are. With just a few taps, you can log your bullion and get a clear picture of your portfolio's total value. The app also breaks down the value of each metal, whether you're using spot prices or offer prices.

All Metals Valuation
Single Metal Valuation
Silver Value Over Time


The spot price valuation is shown in two ways: at the annual report level, where you can compare gains or losses year by year based on the market value of precious metals, and at the order level. At the order level, you can see the current value of a specific order and how its value has changed since you bought it.

Annual Report Valuation
Order Valuation
Order Value Over Time


Also, the app displays the reference price for popular bullion coins, which reflects the average price over the last 24 hours. You can see these prices for items in your inventory and for coins listed in the 'Bullion Catalog' section.

Offer Prices
Inventory Item Offer Price
Catalog Bullion Reference Price


Conclusion

Spot and offer prices are crucial for keeping track of your precious metals portfolio value and figuring out your overall worth. This information comes in handy when dealing with taxes or thinking about selling some or all of your metals.

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