Prices of Gold Coins: How are They Determined?

Posted by Sun on December 6, 2007
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Did you ever wonder why the prices of bullion coins containing the same amount of gold are different and how they are determined?

Yesterday, I read an article on GoodSeek.com (I also subscribe to their free daily Gold Seeker Report, which provides a nice summary of the precious market) that explains the prices discrepancy among gold coins and how they are priced. For example, the spot gold price right now (December 5, 11:00 pm) is $792.10 an ounce according to GoldPrice.org. Some popular gold coins at BullionDirect.com, where I bought my Amerian Buffalo Coin, are priced as following:

  • 1 oz American Eagle Gold Coin: $827.75, 91.6% pure gold;
  • 1 oz S. African Krugerrand Gold Coin: $811.75, 91.6% pure gold;
  • 1 oz American Buffalo Gold Coin 2007: $831.75, 99.99% pure gold;
  • 1 oz Austrian Philharmonic Gold Coin: $816.74, 99.99% pure gold;
  • 1 oz Canadian Maple Gold Coin: $816.75, 99.9+% pure gold;

So even with the same content, the price difference between the high and the low from the same dealer is about $15, and the prices are all much higher than the value of spot gold. But we are buying the same amount of gold, right?

Well, in addition to the rule of supply and demand, the price of gold coin is determined by a number of factors, including, according to the article

  • Production cost
  • Distribution and administration cost
  • Purity of the coin
  • Condition of the coin
  • Deal mark-up

Just like any other goods we consume. All these additional costs is summarized as one term gold coin premium, which is defined in the article as

the additional cost of a bullion coin above and beyond the market value of the precious metal commodity it contains.

If you are interested in investing in gold/gold coin, check out the article, Bullion Coin Pricing, by Michael Clark, for some background information on what affects the price of gold coin.

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7 Comments
January 7, 2008

Unfortunately most of my collection is anything but gold but now I know what to look for when buying, thanks for this information.

Posted by coin auction
February 6, 2008

Great article! Gold coins had a very long period as a primary form of money. And also good form of investing. You gave a outstanding note on value of gold coins. I thanking a lot for your information.

Posted by Colin
May 11, 2008

You make a real good point about the differing prices. It can make even more of a difference, depending on where you are buying gold coins. The dealer markup portion of the cost can vary widely. Make sure you get qoutes from several dealers before purchasing.

Posted by Ken
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