Post by "AGRO" on the GIM forum. IMO well worth passing on. Thanks AGRO!
I remember a while back people asking "what the difference is between spot price and melt price." Also "why does one product say over spot and one over melt but it is the same?"
There is a BIG difference and I will try to explain the best I can.
SPOT price is the spread between the bid and ask prices set in the market you are dealing in for that region by the commodities trade of the given metal, for that trading day.
There are always 2 spot prices.
BID= if you are selling metal to a dealer, this is the price at which the market dictates what the given value is at that minute or at close of day trading for your region (internationnaly.) A dealer or individual will "buy/pay" for your PMs. "I'll pay spot for Engelhard and 95% on "Generic Silver."
Simply, APMEX will pay you "bid" price if you sell them PMs... once the price is locked in.
ASK= The price at which the market dictates metals are sold. You or a dealer start your "base" price for selling metal at spot "ask," PLUS premiums.
Hence, .99 Over Spot!
MELT: Value is the median price at which a "refiner/s" will pay you for your metals. The reason why "dealers" may say "over melt" is because they are claiming that their refiner or refiners will pay them/you the same "melt" value for said metals, LESS premiums.
Also, if you were to take your metals to a refiner the "melt" value will often be less than the base "over melt" by a dealer.
METAL XYZ= 1/ t-oz = 1.00 Market "ASK" For instance COMEX metals trade at spot "bid and "ask."
METAL XYZ= 1/ t-oz = 1.00 Market "ASK" + .99 over SPOT = Final PR 1.99
METAL XYZ= 1/ t-oz = 1.10 Market "ASK" + .89 over MELT = Final PR 1.99
Same price right??? Yet, less "premium" (could be reversed) on the "over Melt" items... "Melt" will vary between refiners. It, as far as I am concerned is not an accurate way to judge the charged premium via big online dealer. Real "melt" is when you walk into a refiner to sell. In some cases this price will be better than selling to your favorite "local."
Hope this clarifies a bit,