Spot price is not the price you pay
Spot is the price for immediate delivery of a large quantity of pure metal between institutions. It is the reference everything else is quoted against, and it is not available to you.
What you actually face:
- A premium when buying. Coins and small bars carry a mark-up over spot to cover minting, distribution and the dealer's margin — commonly 3–8% on gold bullion and considerably more on small silver.
- A discount when selling. Dealers buy below spot. The gap between their buy and sell price is the spread, and it is the real cost of owning physical metal.
- Jewellery is different again. You pay for design, brand and labour on top of metal, and when you sell you usually get scrap value only. The purity selector above gives you the metal content — treat that as a floor, not a valuation.
A troy ounce is not an ounce. Precious metals are weighed in troy ounces of 31.103 grams, about 10% heavier than the everyday ounce of 28.35 grams. Using the wrong one overstates or understates a holding by a tenth, which is why both are in the unit list above.
What moves the gold price
- Real interest rates. The most reliable relationship. Gold pays no income, so when inflation-adjusted yields on bonds rise, holding gold costs you more in forgone interest and the price tends to fall. When real rates go negative, gold usually does well.
- The dollar. Gold is priced in dollars globally, so a stronger dollar mechanically makes it more expensive elsewhere and tends to push the price down. This is also why your local gold price can rise while the dollar price falls — check the currency converter to separate the two effects.
- Central bank buying. Central banks hold gold as reserves and have been substantial net buyers in recent years.
- Fear. Wars, banking stress and political crises send money into gold, quickly and unpredictably.
Silver behaves differently
Silver is both a precious metal and an industrial one — electronics, solar panels, medical uses. That gives it a second driver gold does not have: manufacturing demand, which rises and falls with the economy.
The practical consequence is that silver is considerably more volatile. It tends to move further than gold in both directions, and the buy-sell spread on small quantities is much wider in percentage terms.
Is gold an inflation hedge?
Over very long periods — decades and centuries — gold has broadly preserved purchasing power. Over the horizons most people actually plan around, the relationship is much weaker: there have been high-inflation years when gold fell and low-inflation years when it soared.
A more defensible description is that gold is a hedge against monetary and political disorder rather than against the inflation rate itself. If protecting purchasing power is your goal, look at what inflation does to cash first, because that is the certain loss.
Physical, ETF or neither
Physical metal is yours outright with no counterparty, but you pay the spread, and you have to store and insure it. An ETF or fund tracks the price with tiny spreads and an annual fee, but you own a claim rather than the metal. Mining shares are not gold at all — they are equities that happen to be sensitive to it, with company risk attached.
None of these belongs in money you need soon. Gold can and does fall for years at a stretch, and it produces no income while you wait. Nothing on this page is investment advice.