The Costs Of Buying And Selling Gold
Any transaction you make, whether it be buying or selling precious metals - such as gold, right down to the act of buying your weekly groceries, or a lottery ticket, will incur a transaction fee. Of course, these fees are all charged in different ways, and are in fact called different thing. For example - the costs of selling gold might be referred to as a "commission", which the cost of buying your groceries would come under the category of "bank fees".
Regardless of these nominal titles, our point that you pay in some way for everything you buy and sell can be easily proven. Therefore, if an effort to provide clarity to the system of exchange, this article will look at the fees, charges, and transaction fees imposed on individuals, businesses, and traders alike - when buying and selling gold and other precious metals. We will refer to gold in particular, because this is by far the most commonly traded metal in the world.
Dismissing The Terminology.
There is no getting away from the fact that no matter what it is called - the act of paying a fee, charge, commission, rent, tax, etc - is all to be looked upon as an expense. As mentioned earlier, the applicable term to the gold market is one of two things:
- commission
- spread
This latter term is one which is not very well known by people outside the financial industry. Alternatively, the idea of a commission is widely known to be a financially viable way of reimbursing someone for a service or sale. Usually, these two methods of profiting from the facilitation of the sale of gold are charged independently of each other. In other words, if an exchange provider charges a commission - there will be no spread, and if there is a spread in place - there will be no commission.
What Is A Spread.
As you may be able to tell from the term itself, a spread is the difference in the bid and ask price for a particular financial instrument. If we say that the spread of 3 pips - it means that there are 3 points worth of difference between the asking price, and the selling price.
Market makers can impose a spread purposely, which is how they are able to profit from each transaction, without imposing a separate transactional cost on the trader.
