Ever wondered how bullion dealers calculate the premiums on your bullion? There is a simple formula used that will even the least gifted math student can use:

Final price = (Spot price per ounce + Premium per ounce) x weight

Here are a few examples to illustrate the formula. You may refer to the table at the bottom for all examples.

Spot price of silver = US$20

Premium per ounce = US$2

Weight of bar = 10 ounces

Final price = (20 + 2) x 10 = US$220

But wait, what if we have something in kilograms? Then the weight will have to include the conversion matrix. See the next example for instance.

Spot price of silver = US$20

Premium per ounce = US$2

Weight of bar = 1 kilogram

Final price = (20 + 2) x 32.1507466 = US$707.32

That’s it! No complicated math, no percentages, nothing. As long as you know the spot price, the premium per ounce, and the weight of the bullion you’re buying, you can calculate the final price you should be paying for the piece of bullion you want.

Do take note though that there are dealers who charge a percentage of the spot price as premiums rather than using a fixed rate. This percentage may increase as spot price decrease and may not decrease as spot price increases. 

Here is how their formula looks like:

Final Price = (Spot price per ounce + (Spot price per ounce x Premium percentage)) x weight

An illustration will make it clearer.

Spot price of silver = US$20

Premium percentage = 10%

Weight of bar = 10 ounces

Final price = (20 + 2) x 10 = US$220

When spot price increases to $25 and the percentage does not come down, we have the following calculation:

Spot price of silver = US$25

Premium percentage = 10%

Weight of bar = 10 ounces

Final price = (25 + 2.5) x 10 = US$275

That is an extra US$0.50 premium per ounce or US$5 for the 10 ounce bar. 

	Spot ($/oz)	Premium ($/oz)	Weight (oz)	Price ($)
Fixed dollar premium ($2)	20	2	10	220
	20	2	32.1507466	707.32
Percentage premium (10%)	20	2	10	220
	25	2.5	10	275

Here at RT Bullion, we only use the fixed premium calculation. You can always check with us the premium in dollar amount before buying. It may fluctuate depending on the currency conversion rates, however by and large the premiums are a fixed dollar amount.

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