A 1g PAMP gold bar costs maybe 20% over spot. A 1kg PAMP gold bar costs maybe 2% over spot. Same brand, same purity, same vault — the premium is 10× higher per gram of gold in the small bar. Knowing why explains a lot about how the UK bullion market actually works.
The four layers of every premium
A bullion premium isn’t one thing — it’s a stack of costs and margins layered on top of the spot price.
Layer 1 — Refiner / mint fabrication cost
Producing a coin or bar isn’t free. Each unit incurs:
- Blank preparation (cutting, weighing, polishing).
- Striking or pouring.
- Quality control and re-weighing.
- Assay card or certificate.
- Packaging.
These are largely fixed costs per piece, not per gram. Producing a 1g bar takes essentially the same labour as a 100g bar — the metal cost varies hugely but the fabrication cost per piece stays roughly constant. So the per-gram fabrication overhead is huge on small items and tiny on large ones.
Rough rule of thumb at a refiner:
- 1g minted bar: ~£8 fabrication cost.
- 10g minted bar: ~£10.
- 1oz minted bar: ~£12.
- 100g cast bar: ~£20.
- 1kg cast bar: ~£40.
Notice how absolute fabrication cost roughly triples from 1g to 1kg — but the gram count rises 1,000×. The per-gram fabrication cost collapses from £8/g to £0.04/g.
Layer 2 — Mint / refiner margin
The refiner needs profit too. This is typically 2–5% over their own cost of metal plus fabrication, with prestige brands at the higher end. PAMP, the Royal Mint and the Royal Canadian Mint can charge more because their brands resell at near-spot — buyers pay for that resale liquidity.
Layer 3 — Dealer margin
The UK retail dealer (BullionByPost, Atkinsons, Bairds, Chards, Hatton Garden Metals etc.) buys from the refiner and resells to you. Their margin covers:
- Wholesale buying spread.
- Stock holding cost (gold tied up in inventory).
- Insurance and security.
- Shipping, marketing and customer service.
- Their actual profit.
Typical UK dealer margins:
- 1–2% on 1kg gold bars (very competitive at this size).
- 3–5% on 1oz coins and bars.
- 8–15% on sub-10g items.
Different dealers compete on this margin. Compare a Royal Mint bar from the Royal Mint direct vs the same bar at BullionByPost — the resale dealer is often £20–£50 cheaper because the Royal Mint charges a premium for buying direct.
Layer 4 — VAT (silver, platinum, palladium only)
UK silver, platinum and palladium carry 20% VAT on top of all the above. Gold is exempt for investment-grade. (VAT on silver explainer →)
This is why a 1oz Silver Britannia coin can carry a 50%+ apparent premium over spot when you include VAT.
Why small sizes get punished
The takeaway: fabrication cost is the dominant component of small-bar premium. A 1g gold bar costs roughly the same to make as a 5g bar. So the per-gram fabrication cost is 5× higher on the 1g.
Add the mint margin (percentage of metal cost, roughly constant per gram) and dealer margin (also roughly percentage-based) and you get the classic premium curve:
| Size | Typical premium (gold) |
|---|---|
| 1g bar | 18–25% |
| 5g bar | 12–18% |
| 10g bar | 6–10% |
| 1oz bar | 3–6% |
| 100g bar | 2–3% |
| 1kg bar | 1.5–2.5% |
The right-most column is what you actually pay above the spot price shown on this site’s dashboard.
Why coin premiums are higher than bar premiums of the same size
A 1oz Britannia coin carries ~4–5% premium. A 1oz Britannia bar carries ~3.5%. Same gold content, same mint — why the gap?
Because coin production is more expensive than bar production:
- Coins are struck under much higher pressure with more elaborate dies (Britannia’s allegorical design vs a flat bar’s design).
- Coins go through more QC because each is legal tender (face value liability).
- Coin packaging and assay cards are more elaborate (numbered).
- Coins justify the higher mint markup because they offer legal-tender CGT-free status — that’s worth real money to UK buyers.
Why some premiums spike unpredictably
In normal market conditions, premiums settle at the levels above. But three events disturb them:
1. Retail buying frenzies
During the silver short squeeze of January-February 2021, the typical 1oz Silver Eagle premium spiked from ~30% to ~75% in a fortnight. Retail demand massively outpaced refiner production, so dealers ran out of stock and could charge anything.
2. Currency crisis or QE
During acute inflation periods (2022 example), demand for physical gold rises sharply across all retail dealers. Premiums on smaller sizes (1g–10g) can rise from 8% to 15% within weeks.
3. Mint outages
When the Royal Mint or US Mint can’t keep up with demand for a specific coin, secondary-market premiums for that coin spike. The 2021–2022 US Mint Silver Eagle shortage saw secondary premiums hit 40%+ over spot.
How to keep premium pressure low
- Buy bigger sizes when you can. 1oz over 1g, 100g over 1oz, 1kg over 100g — each step down the size curve cuts premium per gram materially.
- Buy off-design. Generic refinery cast bars beat designer minted bars on premium. The trade-off is resale presentation.
- Avoid retail panics. Wait out short squeezes rather than buying into peaks.
- Compare dealers. UK dealer spreads vary 1–3 percentage points on the same item. Run quotes from at least 2–3 dealers before placing material orders.
- Watch the buyback side. A dealer with a low sell premium and a wide buyback spread is no cheaper than one with a higher sell premium and a tight buyback spread.
See PAMP gold bars across all sizes →