1 gram of gold at spot is $X. Why is this more expensive?

You could say we get this question (well, comment, really) a lot. And to be honest, it's a really good question, but a difficult one to answer because it requires kind of a lengthy reply. So let's dive in.

Numbers current as of article's initial authoring on January 18, 2025

What is a "spot price?"

Put simply, this is the current market price for something that is actively traded. It represents the price the buyer would pay “on the spot” for immediate delivery of that thing being purchased.

Gold is actively traded as a commodity, so it has a spot price that fluctuates with supply and demand pressures. But, importantly, that thing being traded here at the spot price is not typically the thing that would be finally purchased by a consumer, like you or me.

So what is the gold spot price actually for?

Gold spot prices are for giant bars

That price for gold that everyone can see is not the price for all gold products – it’s the spot price for typically a 400 troy ounce, LBMA-certified wholesale bar of gold traded in large volumes by bullion banks and major commodity exchanges.

You can’t go to the jewelry store and get a gold chain at the spot price of gold. You can’t even get a small (1 troy oz) bar of gold at spot (though the markup is low!). The closer the product is to that big giant wholesale bar of gold, or the more gold it has and simpler it is, the less over spot you will typically pay.

What about the "melt value?"

This is related to (and can be the same) as the spot price, but can vary depending on the purity of the gold in the product. Typically, the melt value is the fiat (or dollar) amount you would get if you melted down the product and retained only its gold content. If the product has pure 24k gold, this would be the same as the spot price for the same amount of gold. Because some gold products (like jewelry) are alloyed and not pure 24 karat gold, and because sales prices often carry their own premiums depending on where you buy, this can be different than the spot price.

Who trades at the gold spot price?

Those who trade at the gold spot price in certain markets are those that influence the price. Here’s the top 5 classes of these traders and an approximation of their volume relative to the whole:

1. Major commercial producers or hedgers: ~20%
   1. These would typically be the actual gold mines
2. Large industrial consumers: ~30%
   1. These are companies that buy gold for use in various manufacturing applications, like electronics
   2. It also includes companies that buy gold at scale for jewelry production and other gold products (like Aurums)
3. Institutional investors (hedge funds, asset managers, pensions, etc): ~30%
   1. Because gold is a strong inflationary hedge with relative price stability and long-term growth, gold commodities are deployed in many large portfolios as a diversification strategy
4. Banks or broker-dealers: ~15%
   1. These companies facilitate large trades, provide liquidity, store the gold, and manage delivery
5. Retail investors or traders: ~5%
   1. Everyday people buying gold as an investment, gift, savings, for fun, and so on

What are "premiums?"

The premium is what you pay over the spot price of gold for a gold product. This can vary widely by the type of gold product it is, the amount of refining or processing that goes into turning it into a new product, and more.

Product	Premium
1 troy ounce bars	2-5%
Generic rounds	2-5%
Sovereign coins	4-10%
Fractional coins or bars	8-15%
Commemorative or collectible coins	Varies widely, 20%+ typical
Fractional gold bills	Varies, 100% typical
Jewelry	Varies widely, 100%+ typical

The more you do with gold, the higher the premium

This makes a lot of sense if you think about how any gold product is made:

• Gold is sold at spot to companies to make other products out of it
• These companies then apply labor, other materials, intellectual property & practices, and various manufacturing to create a new product with that gold
• Each of those steps incurs costs (labor, materials, energy, and so on)
• The new product then is priced to include those costs, which have also increased the value of the product
• The new product thus is more expensive than the cost of just one of its components

And if you think more about it, this is how all products work. Let’s take a very simple pizza as an example. The pizza joint buys the flour (for dough), the sauce, and the cheese. Each of these ingredients is purchased by the pizza joint for over their commodity spot price. They then apply labor, packaging, energy, and other know-how to create a brand new product out of those components: pizza. It’s priced to include the costs of the components and other manufacturing expenses, and in the world of all pizza products, it’s a price you would expect.

The price of this pizza, however, is more than the spot price of flour, because it’s not just flour: it’s a pizza. It’s something new, and it does more than flour does on its own.

To tie this back to gold, a gold bar would be kind of like a big sack of flour: there's not a lot to do to it other than put the flour in a new shape. The pizza, then, is more like a gold bill: it has flour, but it's really quite different than a sack of flour.

The less gold you work with, the higher the premium

Here’s where some education is really important, because this point can seem counter-intuitive at first: It costs more to make products out of smaller amounts of gold. Here’s some of the reasons why.

Fixed costs independent of the gold content

For every unit of inventory you produce – or every product you make with any amount of gold – there will be overhead in packaging, labor, processing, and more. These costs would be similar for a product with 1 milligram of gold or 1 gram of gold. Priced as premium over spot, the 1 milligram product has to include fixed costs (not just the gold) making it much higher relative to a product with a larger amount of gold.

Think about it this way: a bar of gold is a lot of gold melted into a one shape and sold very close to spot. It's quite a simple product. Fractional gold takes that bar and splits it into thousands of separate pieces, then processes each into a brand new gold product. Making 1 bar of gold is cheaper than making thousands of new products out of that single bar. You know, because you're not making thousands of other products. =)

Buying in bulk vs. buying individual units

If you just view gold as a commodity and don’t care about what that gold product is or can do, then it’s easy to understand why small amounts of gold trade at a higher premium than large amounts of gold: The spot price represents buying an enormous amount of gold, not buying any amount of gold. You’re benefiting from buying in bulk.

Just like you would expect when you shop for oatmeal at any store, the individually packaged single-serving oatmeal products are the most expensive. As you buy larger and larger amounts of oatmeal, the price for the total amount of oatmeal goes down, all the way up to the giant 5lb bags you can buy at places like Costco.

The single-serve oatmeal pouches provide you with convenience and utility, and the tradeoff is higher fixed costs around packaging and other aspects of manufacturing.

Some spot prices you don't know about

By the way, gold isn’t the only commodity that trades and has a spot price. You are likely unknowingly buying commodity products through brands at very high relative premiums every single time you buy normal, everyday items.

Coffee

Coffee is a commodity that trades just like gold, and the spot price now is around $3 per pound. Coffee at the store, however, easily goes for $10-20 per pound. That’s quite the premium, and that’s because what establishes the coffee spot price are traders moving large (37,500lb lots) of unroasted green coffee beans. Those beans still have to be roasted, optionally ground, and then packaged before making their way to stores.

Sugar

Sugar is another commodity that trades just like gold, and the spot price now is about $0.18 per pound. Despite typically needing very little extra processing to get it store-ready (relative to other commodities), a pound of sugar at the store can go for about $1.50, which is still quite the premium.

Oats

We gave an example about oatmeal earlier, and oats are another traded commodity. The spot price of oats is $3.62 for a “bushel,” which is a volumetric measure standardized to about 32lbs worth of oats. After milling, cleaning, and packaging, even the 5lb bag of oats at a big box store still sells for over $6, which is a huge multiple over spot.

In general

Of course, as you buy larger and larger quantities of these commodities, the effective price per metric will get closer and closer to the spot price. But these are only a few examples of where the spot price does not directly establish the market price for goods containing that commodity. There will be some directional correlation, but smaller units of commodity inventory incur more fixed costs, and thus are sold at a higher premium than larger quantities. The economy does not function because companies sell their products at prices lower than what it costs to make them, after all.

So is a gold product with a high premium a bad thing?

If you’re buying a 400oz t gold bar for 80% over the spot price, you are massively, massively overpaying for that gold. This is a bad trade, it’s a bad buy, and you shouldn’t do it. Ever.

If you’re buying a 24-karat gold necklace from a well-known artisan and it’s 80% over its melt value by weight (and thus spot price), it’s just not as clear-cut. The artisan spent time, energy, materials, and more to create something new from that raw gold commodity. They’ve imparted their skill and created something functional, beautiful, new, and rare from that commodity. Should it cost the same as the raw gold that was purchased to create it?

If you want 1 kilogram of gold, you can expect to buy it for $86,810, or damn near the spot price. If a mint takes that and turns it into 1,000 bars of gold weighing 1 gram each, that will cost more to create as it’s literally a thousand more products. If they made 2,000 bars each weighing ½ a gram (500mg), that’s even more overhead to produce 2,000 more products, and so the premiums increase. The tradeoff being you are able to obtain the gold product at an affordable price, because you aren’t having to shell out thousands and thousands of dollars at once.

So why are fractional gold bill premiums so much over spot?

With the backstory and light education on premiums out of the way, we can tackle the real question: Why in the world would you buy gold in a bank note form factor, when making fractional gold like that means a price high over spot?

Because:

• Gold bills are voluntary currency based on sound money principles
  • Don’t care about that? That’s OK! Everything is not for everyone
• Gold is expensive!
  • Buying large amounts of gold is great, but it comes with a large outlay of cash
  • Smaller amounts have higher premiums, but the prices are more broadly approachable, especially for beginners
• You cannot easily buy goods & services with gold bars, rounds, or coins
  • Bars are huge, heavy, and contain an enormous amount of value (~$2,000-760,000)
  • Bills are small, light, flexible, and contain a practical amount of value for daily use
• Fractional gold bills enable everyday commerce by being an exchangeable product with everyday amounts of value
  • Try buying something with a gold bar or coin
• Fractional gold bills are protected by modern anti-counterfeiting measures and have never been successfully counterfeited
  • Try proving your gold coin is genuine at the register
• Fractional gold bills are surprisingly widely-circulated
  • Known also as Aurums, there are over 30 million in circulation
• They contain intricate artwork, which is both beautiful and hard to fake or emulate
  • Gold bars are awesome, and some have incredible stamped designs
  • We’re biased of course, but full-color fine art looks even better
• Some Aurums are designed to be more akin to collectible rare stamps
  • There’s only so many of some Aurums that will ever be made
  • They still have the utility and intrinsic value, but the premiums are much higher due to rarity, licensing, and more

This is not bare metal

It bears repeating: fractional gold bills are much more than the gold inside. This is a certified gold product that has, for the first time in history, fused art, a bank note form factor, and gold to create a new kind of asset with intrinsic value and practical utility.

It has the same modern anti-counterfeiting security you would expect from the most widely circulated currencies in the world, it’s easily verifiable as genuine, and so much more.

This is the first time this technology has existed on Earth

If you haven’t held one one of these Aurums in your hand, you don’t fully understand this part – yet.

It has historically been a challenge to produce products with small amounts of gold without premiums extending into many, many multiples above spot. Only within the past decade has the technology been possible to do this, and every year it’s improving.

The mint that makes MetalMark Standard is the only mint of its kind on the planet, which uses technology adapted from the semiconductor industry to atomically deposit gold. This is a simplification of but one step in the manufacturing gauntlet, where each bill then runs through real, hyper-regulated currency printers along its journey to being done.

It’s an internationally-patented and proprietary process, and it requires the use of multiple machines the size of living rooms. From huge vacuum chambers layering in the gold, to the miles of various machinery weaving together security features and other components, to the rigorous quality control – this is in a class all its own.

The premiums to fractional gold bars is comparable

Fractional gold bars, coins, rounds, and the like that have comparable amounts of gold typically go for well over 100% the spot price. That isn’t to say you can’t find a great deal on ½ gram bars, or 1/10th oz bars; going smaller is where you incur the higher premiums.

Product	Gold (mg)	Price (USD)	Gold value (USD)	Premium over spot
1/200 oz t gold round	155.52	$26.32	$13.50	95%
0.1g gold bar	100	$44.00	$8.68	406%

But, maybe more importantly:

Why are you interested in gold?

If you think that all gold products should be priced as close to spot as possible, be they jewelry, rounds, bars, coins, fractional gold bank notes, or otherwise, then you should only buy gold in bar form in the largest amount possible. This will ensure you are paying the lowest possible premiums and receiving the maximum amount of metal for the lowest possible price. Gold bills aren’t for you. That’s it – period, end of story.

If you’re interested in the other side of the coin (or bar, as it were), then you can see more utility and potential in a gold bill than simply its current premium over the spot price of gold. After all, a fractional gold bill packs much more utility than the bare metal by itself. And we’re biased, but we think it’s way cooler.

The movement for sound money via gold bills

If you know anything about fiat currency, then you know about the most controversial feature: inflation, or the ability for a central controlling body to arbitrarily inject more of a currency into circulation, devaluing that currency over time.

Yes, devaluing as a feature is why fiat systems dominate the global economy, and why many other types of asset classes exist to protect value from this erosion over time. For example, when you invest in real estate, you are converting fiat currency into another asset that will minimally preserve the value over time, and ideally gain value over time.

Fiat currency will lose value over time due to inflation. Your dollars are worth less the longer you hold them in dollars. This is really great if you rack up debt over time, as your debt obligation becomes less as the currency is devalued (super nice if you have, say, trillions in debt). But it’s pretty terrible if you’re trying to grow your wealth over time, as that hard-earned currency you worked for simply loses value.

If you don’t convert your fiat into something else, or try to actively put it to work (like in the market or another form of investment), then you’re just losing value and purchasing power, forever.

That sucks, and it’s bizarre we accept that we’ll work for a majority of our lives in exchange for money that loses value over time. Why not something that preserves its value over time – or even gains value?

What is "sound money" and how does it come into play?

The term “sound money” (also “hard money”) refers to a form of currency that reliably holds its value over time, is difficult or impossible to inflate or manipulate, and otherwise has its supply constrained such that creating more is an enormous burden, at the least.

As you can probably guess, the most dominant form of sound money over time has been precious metals – specifically gold and silver. A quick look back in human history will show that gold has been valued across time, cultures, regions, and more. It continues to act as an amazing inflation hedge, and a stable way to convert fiat to something that will preserve (and grow) in value over time relative to fiat and its inflationary feature.

There is a finite amount of gold on the planet, we’ve mined a majority of it, and not much additional gold is pushed into the market on a yearly basis – and not much more could be pushed into the market. This creates a nice foundational layer of scarcity.

There’s also utility in gold beyond its rarity, such as in the printed circuit boards of electronics, and in various applications across the semiconductor, aerospace, medical industries. This helps create strong demand for the metal for practical purposes outside of simple speculation.

A gold-backed currency (or medium of exchange) would then adhere to sound money principles:

• Reliably holds its value over time
• Difficult to inflate or make more of
• Difficult to counterfeit
• Come in convenient denominations ready to exchange

Prior art in fractional gold bills

You can’t really talk about fractional gold bills (or bank notes) without talking about the biggest, baddest brand in the space: the Goldback®. We’re fans.

Goldbacks are similar to MetalMark Standard bills: they are Aurums, made by the same mint, contain the same technology, and aim to accomplish many of the same goals. In fact, we’re only slightly different in a few key ways.

MetalMark Standards have a double-sided design

We’ve incorporated an “obverse” or back design for our bills. This helps give the bill much more rigidity and strength, helping to prevent curling, warping, and other damage. We also think it just makes for a much cooler experience.

We use the metric system instead of fractions of troy ounces

This may be controversial, but we find the imperial system of measurement to be arbitrary, confusing, and just plain difficult when doing mental math.

Adhering to the metric system lets MetalMark create denominations that clearly define exactly the amount of gold contained within each bill, without having to do any math or look anything up. Our “500” bill is 500mg, the “1000” bill is 1000mg, and so on.

Goldbacks use a clever abstract denomination derived from the amount of gold they contain in troy ounces:

Goldback denomination	Gold amount (oz t)	Gold amount (mg)	Price (USD)
½	1/2000th	15.55	$2.70
1	1/1000th	31.1	$5.40
2	1/500th	62.21	$10.80
5	1/200th	155.52	$27.00
10	1/100th	311.03	$54.00
25	1/40th	777.69	$135.00
50	1/20th	1,555.17	$270.00
100	1/10th	3,110.35	$540.00

The denomination is the gold amount in troy ounces multiplied by 1000: 1/40 * 1000 = 25, 1/100 * 1000 = 10, and so on.

The price per mg of gold in a Goldback is fixed across each denomination to create true fungibility, and at the time of writing is $0.174.

When represented as Goldback denominations, our Standards look as follows:

MetalMark denomination	Gold amount (oz t)	Gold amount (mg)	Price (USD)
500	~1/31	500	$80.00
1000	~1/62	1,000	$160.00

The price per milligram of gold in a MetalMark Standard is also similarly fixed across denominations for fungibility, and is $0.16.

And yep, if all you care about is the spot price of gold and how this stacks up – it’s almost double the spot price per milligram. But then again, your sugar, coffee, soybeans, orange juice, lumber, and more will also run you over their respective spot prices. And unlike your coffee, these don’t perish, will rise in value over time, and can be used as voluntary currency.

But what about those art prints you sell?

They’re limited edition collectibles with all of the same awesome properties of gold, fractional golden bank notes, and fine art. They’re Aurums just like all the rest, contain the same security features, and even come in a nice display case with a Certificate of Authenticity.

They’re priced higher than our MetalMark Standards, and they’re priced higher than any other standard gold product. They’ll always be more akin to a rare golden stamp, or a rare piece of golden jewelry.

Fine art minted on gold looks stunning. We’ve made these bills bigger than our Standards to give the art a larger canvas to quite literally shine. We’ve also minted them on gold, giving each print an amount of intrinsic value, in addition to collectible value and their value as a fine art print.

It’s not free to license fine art, and it’s not free to make Aurums. We price these collectibles by their rarity and other factors. Yes, the melt value of the gold they contain will always be less than their market value and the price we sell them. This is not a gold bar being sold at spot – it’s a vastly different value proposition around the rarity and collectibility. And if that’s not for you, that’s OK!