Generally, the current price (spot price) for gold is based on one futures contract for gold. That futures contract theoretically controls 100 troy ounces, or one brick of gold (1,000 oz for silver). Gold or silver futures are standardized, exchange-traded contracts in which the contract buyer agrees to accept delivery of a specific quantity of gold from the seller at a predetermined price on a future delivery date. The most significant gold futures exchanges are the COMEX in New York City, The Chicago Mercantile Exchange, and the Tokyo Commodity Exchange.
Spot Price – The current market price at a given time and place for a commodity. The two spot price types are the Ask and Bid price.
Ask Price – The minimum price that a dealer is willing to sell for one troy ounce of precious metal.
Bid Price – The maximum price that a dealer is willing to purchase for one troy ounce of precious metal.
Premium – The value of a coin above its intrinsic value (value above the spot price).
Spread – The difference between a dealer’s Bid and Ask price.
Melt Value – The value of the metal content of a precious metal object, regardless of workmanship or rarity. The raw value of an object if it were melted down. Metal value is usually only calculated on the precious metal content of an item. For example, the melt value of a sterling silver coin only takes into account the 92.5% silver content of the coin, and ignores the 7.5% copper content.
Think of the spot price of gold/silver as a guide correlated with the physical product, sort of like the way the price of oil is loosely tied to what you actually pay at the pump. Premiums vary depending on the product. Generic gold items usually have lower premiums. A more intricate design on a gold bar or gold coin will raise the premium. Rare or limited edition products will also have high premiums. The reason for this is twofold. Highly artistic gold/silver products are more costly to manufacture. Buyers are also willing to pay more for such items. Many factors make up the premiums on physical gold/silver, and these factors constantly change. The spot price is just one of them.