When talking about precious metals, the terms “spot price” refers to the value of the silver present in a silver bar, or gold in a gold bar. As you probably know, the amount of precious metal in a bar directly determines how much that bar is worth, and thus will cost. Obviously, online and brick and mortar sellers of precious metals cannot sell their products at spot value because if they operated in this fashion they would make no money and be quickly run out of business.
Instead, sellers add what is called a premium to the cost of their silver bars in order to turn some sort of profit. The premium you encounter on the silver bullion that you would like to buy is dependent on two main criteria; the first is the brand of the bar at hand, and the second is who the online seller is. As an investor your goal is to purchase silver bullion at a price that is as close to the spot value of the metal as possible.
Finding Low Premiums
Like we alluded to earlier, the goal of an investor is to buy silver bars at a price that is as close to spot value as possible. While that is good advice, it is much easier said than it is done. The reason this is such a difficult task to accomplish is because there are so many different producers of silver bars.
For example, a one ounce silver bar produced by Company A may cost a lot less than the same sized silver bar produced by Company B. You may be confused as to how two seemingly identical silver bars can have such large price disparities, but the answer is quite simple, brand power.
It may be hard to fathom that brand power exists when talking about the plain silver bars that investors purchase, but just like a person will pay more for a TV produced by their favorite company as opposed to the same TV produced by someone else, an investor will endure a higher premium just to get the bar he or she wants.
In most cases the premium over the spot value of the silver is not very much and does not change all too much from brand to brand, but when you are purchasing large quantities of bullion, even a 50 cent difference in price begins to make a large impact on the bottom line.
The best way to find the lowest premiums on the silver bars you purchase is to chop around and compare prices. Not every online seller has identical prices so if you neglect to shop around you may be missing out on a better deal somewhere other than the placve you are buying from.
Choose Sellers Wisely
Being able to find low premiums on your silver bar investments will only happen if you are able to choose a seller who will give you a good deal. As you would expect, not every seller was created equal, as some will have huge mark-ups on their products while others will sell their bullion very near spot value.
Your goal as an investor is to shop around and do price comparisons between the many different sellers that you encounter in order to find yourself the best dealer. Sites like APMEX, who are extremely well known and have been around for a while take advantage of their longevity by slightly marking up their products because they know a large majority of their customers will go only to them and not even bother checking other sites. Checking out the prices of a lot of different sellers may not be the easiest way to make a silver bar purchase, but it is the most cost-effective and you will quickly find out just how much money you are saving by making a purchase at a better priced site.
One of the very few occasions where you might be able to buy silver bars for no more than the spot value is if they are secondhand bars. Secondhand silver is visibly worn and not in the mint condition most other silver bars are in.
While the condition of a silver bar is not as crucial to the price as the condition of a silver coin is, when talking about precious metals the wear and tear present will always have at least some sort of impact on the price. A downside to buying secondhand silver bars is that you are not always able to determine the quality of the bar by simply viewing pictures of it online so you have to be extra careful when making purchase decisions.