The price at which a dealer sells gold to you is usually different from the price it offers to buy it back at the same moment. That gap is a transaction cost, not an investment loss that a rising gold market automatically repairs. Compare simultaneous quotations for the same weight, purity and product.
Illustration: one unit, one year
These are invented currency units, not current quotations, forecasts or an EXAM product. Assume no tax, financing cost or extra selling fee, and unchanged product quality.
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| Item | Amount / calculation |
|---|---|
| Your purchase price | 100 |
| Dealer’s immediate buyback quote | 96 |
| Spread as % of your purchase | (100 − 96) ÷ 100 = 4% |
| One year’s custody cost | 1 |
| Required future buyback price | 100 + 1 = 101 |
| Rise needed from today’s buyback quote | (101 ÷ 96 − 1) × 100 ≈ 5.21% |
Why a 4% spread is not a 4% hurdle
The initial gap uses 100 as its denominator; the recovery calculation starts from a buyback quote of 96 and adds custody. The 5.21% applies to the dealer’s future buyback price, not necessarily the quoted spot gold price. Premiums and spreads can change independently.
Ask for an exit quotation
- Check minimum lot sizes, assay charges, packaging conditions, delivery, insurance and settlement time. Compare the same quote timestamp.
- If an extra cost is uncertain, keep it separate and calculate a range rather than assume zero. A future buyback promise should identify the buyer and enforceable conditions.