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A dealer premium is the amount charged above the gold or silver spot price when buying from a UK bullion dealer. It covers manufacturing costs, dealer margin, and supply-demand conditions at the time of purchase - and it is not returned when you sell.
Understanding how premiums are built up, when they are reasonable, and when they are not, changes how you evaluate a quote.
At a glance
| Component | Typical range | Varies by? |
|---|---|---|
| Minting / fabrication | 0.5–3% | Product type, bar size |
| Dealer margin | 1–3% | Dealer, volume |
| Supply premium | 0–15% | Market stress, coin demand |
| Total on major coin | 3–8% | Depends on conditions |
| Total on large bar (1kg+) | 0.5–2% | Lower - fabrication amortised |
What goes into a premium
Fabrication costs
Refineries charge a fee to turn raw gold or silver into bars and coins. This is baked into the dealer’s cost base and passed to buyers. A 1g bar involves almost as much machining and assay work as a 100g bar - which is why small bars carry premiums of 15–30% while large bars can be under 1%. The cost per ounce of fabrication falls sharply as bar size increases.
Dealer margin
The dealer needs to cover overheads - staff, systems, regulation, insurance - and make a profit. For most major UK dealers on standard bullion products, this is typically 1–2%. Smaller dealers with lower volume may charge more.
Supply and demand
This is where premiums can move significantly and unpredictably. When investor demand spikes - as it did in March 2020 at the start of COVID - physical coin supply tightens quickly. The spot price reflects futures and OTC paper trading. It does not constrain what a dealer charges for actual coins in hand. During the 2020 crunch, premiums on Gold Sovereigns reached 12–18% at some dealers, compared to a normal 3–5%.
The reverse also happens. When demand falls, dealers compete on price and premiums compress.
Why premiums differ by product
Not all gold products carry the same premium. The pattern is consistent:
Coins cost more per ounce than bars because minting to legal tender standard involves design work, quality control, and packaging that refining a bar does not. It’s not a dealer markup - it’s the cost of the product.
Size matters too: a 1g bar involves almost as much machining and assay work as a 100g bar, so fabrication costs per ounce fall sharply as weight goes up. That’s why the premium on a 1g bar can hit 25–30% while a 1kg bar sits below 1%.
Buying second-hand is worth knowing about. A pre-owned Sovereign from the secondary market has identical gold content to a new Royal Mint issue - and costs less. The difference is real and exploitable.
Premium guide by product type
| Product | Typical premium (normal market) |
|---|---|
| 1g gold bar | 20–35% |
| 5g gold bar | 10–18% |
| 10g gold bar | 7–12% |
| 1oz gold bar | 2–5% |
| 100g gold bar | 1.5–3% |
| 1kg gold bar | 0.5–1.5% |
| Gold Sovereign (new) | 4–7% |
| Gold Sovereign (secondary) | 2–5% |
| Gold Britannia (1oz, new) | 5–8% |
| Gold Britannia (1oz, secondary) | 3–5% |
The bid-ask spread
Premium is only half the picture. The spread - the difference between what a dealer charges to sell and what they offer to buy - represents the round-trip cost of owning physical gold.
Most major UK dealers buy back at 98–100% of spot (for CGT-exempt coins and standard bars). So the spread on a 5% premium coin is roughly 5%: you pay spot +5% to buy, receive spot flat to sell. You need a 5%+ rise in the gold price just to break even.
For smaller bars with 20%+ premiums, this is a serious constraint on short-term returns. These products make more sense for longer holding periods.
When premiums spike - and what to do
In periods of market stress or sustained high retail demand, premiums on physical coins can become very wide. The 2020 COVID spike was the most dramatic recent example, but premiums also widened meaningfully in 2022 (Ukraine invasion) and 2024 (Middle East tensions).
During a spike:
- Check secondary market prices. Pre-owned coins from dealers like Atkinsons often trade at narrower premiums than new issues.
- Wait if you can. Supply normalises within weeks in most cases.
- Consider larger bars. Premiums on 100g and 1kg bars are less affected by retail coin demand spikes.
Tax considerations
Premiums are embedded in the purchase price - not separately disclosed or taxable. Your cost base for CGT purposes is the full price paid, premium included. When you sell, the taxable gain is calculated on the difference between sale proceeds and total purchase cost (including the premium paid).
For CGT-exempt coins (Sovereigns, Britannias), this is irrelevant - there is no CGT regardless. For gold bars and non-exempt coins, the premium does reduce the eventual taxable gain, since it is included in your cost base.
How people usually decide
If you’re minimising cost, larger bars and secondary market coins are the obvious route - you’re buying gold content, not a mint’s distribution margin.
If CGT matters - and for most UK investors it should - Sovereigns and Britannias carry a premium worth paying. You’re giving up 2–4% at entry in exchange for no CGT ceiling on exit. Over a longer holding period and a meaningful gold price move, that trade looks good.
For regular monthly buying in accessible amounts, Sovereigns are the sensible default: 3–7% premium, excellent secondary market liquidity, and no minimum size constraint. Large bars start making more sense above £20,000–50,000 per purchase, where the premium saving per ounce is material in absolute terms - but you need to factor in the CGT exposure you’re taking on at the same time.
Frequently asked questions
Is the premium negotiable? Rarely on standard products. Large orders (typically above £50,000–100,000) may attract price improvements from some dealers, but most operate on published price lists with thin margins. The more effective route to a lower premium is choosing a different product rather than negotiating the same one.
Why do dealers charge different premiums for the same coin? Different cost structures, different stock positions, and different hedging approaches. Some dealers buy inventory in advance and hedge price risk, absorbing more volatility. Others reprice more frequently. During supply squeezes, dealers with existing stock can charge more because alternatives aren’t available.
Does the premium affect CGT? For CGT-exempt coins (Gold Sovereigns, Gold Britannias, Silver Britannias): no, there’s no CGT regardless. For taxable products, the premium is included in your cost base and reduces the eventual taxable gain.
How do I compare premiums across dealers? Most dealers display their price and the spot price simultaneously. The easiest comparison is simply to calculate each dealer’s price as a percentage above spot at the same moment. Small differences in spot timing can distort the comparison, so check within a short window.