The paper spot price of precious metals refers to the current market price of precious metals, as quoted on various financial exchanges and platforms, for trading in paper derivatives of bullion such as futures contracts, options, and ETFs. This price is determined by the supply and demand of the paper instruments, and can be influenced by a variety of factors, such as economic conditions, geopolitical events, and investor sentiment. This has nothing to do with the physical world where obtaining actual physical metals often come with premiums from 1%-50%+ depending on the items, metal content etc. An example would be American silver eagles 1 ounce silver coins. As of today the premium for those is about 50%+ on the retail market and 40% in the wholesale market.
The actual spot price of physical bullion, on the other hand, refers to the price of physical bullion, such as gold or silver, as quoted in local currency per ounce or gram, for immediate delivery or settlement. This price is typically determined by the supply and demand of physical bullion, and can be influenced by factors such as mine production, global economic and political conditions, and changes in demand for consumer, industrial or investment purposes.
The paper spot price and the actual spot price of precious metals almost always differ, as the paper price is based on trading of paper instruments that do not necessarily involve physical delivery of bullion, while the actual spot price is based on the cost of acquiring physical bullion. This can result in situations where the paper price and the actual price move independently of each other, especially during times of high demand or tight supply of physical bullion. Just like our example above today the premium for those American Silver Eagles is about 50%+ on the retail market and 40% in the wholesale market.
It’s important for investors who are interested in trading in precious metals to be aware of these differences between the paper spot price and the actual spot price, and to take them into consideration when making investment decisions.