If you’ve spent time looking at precious metals websites, you’ve noticed those ever-changing numbers labeled “spot price.”
These numbers really matter when buying or selling gold and silver. But here’s something many investors don’t realize: not all spot prices are created equal. Some dealers adjust these numbers by “padding the spot” on a regular basis – adding hidden markups that increase their profits at your expense.
Let’s examine what spot prices really are, how they work, and how to ensure you’re getting a fair deal when buying precious metals.
What Exactly Is a “Spot Price”?
Simply put, the gold or silver spot price is the current market price at which you can buy or sell gold or silver for immediate delivery. It’s the price of one troy ounce (about 31.1 grams) of pure gold or silver before it’s minted into coins or bars.
As CBS News recently reported, “At its core, gold pricing follows a simple formula: Spot price + premium = Retail price.” Just make sure the spot price you’re quoted is the real one.
The spot price changes throughout trading hours as buyers and sellers make trades worldwide and can vary wildly depending on:
- Supply and demand balance
- Economic conditions and how significant inflation is
- What banks are charging for loans
- Dollar strength relative to other currencies
- Geopolitical situations
- Whether investors are bullish or bearish
When looking at spot prices, you’ll typically see two numbers: the “bid” and the “ask” which is the core principle of how spot price feeds work. The bid is what buyers will pay, while the ask is what sellers want to receive. The difference between them is called the “spread.”
What most dealers don’t mention is that there is no single “official” spot price that everyone uses — it varies based on the reporting source.
The Problem: “Padding” the Spot Price
“Padding the spot” means artificially inflating the spot price above what major market data feeds report. It’s a hidden markup that some dealers use to boost their profit while making their premiums appear lower or to periodically hedge.
Why Some Firms Inflate Spot Prices
Dealers pad spot prices for two reasons: to make more money while appearing competitive or to periodically hedge when the markets are rapidly fluctuating. For example, let’s say the actual gold spot price is $3,200 per ounce. A dealer might display $3,250 on their website as the “spot price.” Then, they advertise a “low premium” of $50 over spot. This results in the price charged to the consumer being $3,300, which is a $100 premium over the true spot price.
Meanwhile, a dealer using the true $3,200 spot might charge a $100 premium, also resulting in a $3,300 final price of the asset. This dealer shows you their actual premium breakdown, but the first dealer hides part of their markup in an inflated spot price.
How Spot Price Feeds Actually Work
To understand spot price manipulation, you should know the source of these prices. Spot prices originate from major trading centers like the COMEX in New York and the London Bullion Market. These exchanges trade enormous volumes of precious metals daily, establishing the benchmark prices that dealers reference.
Most spot price feeds come from data providers that aggregate information from multiple trading sources. Major banks and financial companies contribute to these feeds with their trading data.
How CMI Gold & Silver Gets Its Spot Price Feed
At CMI Gold & Silver, we receive the same professional spot price feeds used by many major dealers. The difference is that we don’t pad these prices unless the markets are fluctuating rapidly, and it is necessary to hedge pricing. This scenario is seldom used except in extreme cases. When you visit our daily spot prices page, you see the actual market prices without any manipulation.
Some dealers take these same feeds but add their own markup before showing them to customers regularly. They might add $20, $50, or even more to the gold spot price — a practice we consider harmful to consumers.
Spotting and Steering Clear of Spot Price Padding
Here’s how to protect yourself from this practice:
- Compare spot prices at several dealer websites: If one dealer’s spot price is consistently higher than others, they’re likely padding.
- Look at the total price: What matters most is the final price you pay, not just the premium over spot.
- Ask directly: Contact the dealer and ask if they add anything to their spot price feed. Honest dealers will give you a straightforward answer.
- Check independent market sources: Sites like Kitco or business news sites report unpadded spot prices.
- Work with established dealers: Like CMI Gold & Silver — we’ve been in business since 1973, offering fair and transparent pricing.
Transparency Matters – Be Sure to Shop Around
When buying gold or silver, transparency from your dealer matters a lot. Look for honest companies that explain their pricing methods and charge reasonable premiums for their products.
Remember that the real value of working with a dealer isn’t just about getting the lowest price — it’s about fair pricing, authentic products, and reliable service. At CMI Gold & Silver, we believe that honest pricing builds long-term relationships with our clients.
Before making any precious metals purchase, always compare total prices from different dealers, not just premiums. Whether you’re interested in gold bullion coins or other products, be sure you understand exactly what you’re paying for.
Call us today to learn more about our transparent pricing and how we can help you make informed precious metals investment decisions.
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This is a three-part Scam series. Check out the other articles:
The Dark Side of Investing: How to Avoid Today’s Financial Scams
Fake Coins, False Claims, and Fraud: How to Spot Gold and Silver Claims
