Why do two similar gold bars have different prices, why? Gold is gold isn’t it?

Two similar gold bars have different prices, why? Gold is gold isn't it?

Why do two similar gold bars have different prices, why? Gold is gold isn’t it?

Yes, gold is gold. There is no difference. The value and purity of gold is the same on two equivalent gold bars.

However, the retail pricing of two equivalent gold bars which are produced by different refineries may be different.

This is because each gold bar has undergone a different cycle of costs associated with the refining and processing gold to 999.9 fineness, casting and minting, packaging, financing and logistics.

Then the gold bars are branded, packaged, stored, transported, marketed and distributed world-wide.

Distribution channels can be as innovative, competitive and persuasive as the risk appetite of the gold refinery and the chain of distribution.

Finally, the dynamics are of the retail sector which eventually sells the gold bars to end buyer create the ultimate selling price of a gold bar. 

Whilst the above explains why there are differences in price between the same bar weights the real question you can ask yourself is: should I pay a higher price for a bar of the same gold content?

The easy answer is: it is up to you. 

A few things, however, should be borne in mind:

Reputation: each refinery has its own reputation based on what the market considers to be the quality of its product. So, yes, each bar has the amount of gold it contains effectively stamped on itbut some refineries have a long standing tradition and reputation of producing certain bars of certain sizes consistently over decades and sometimes more.

Switzerland for example has a long reputation of gold refining and whilst production costs can be higher compared to lower wage countries, the reputation Switzerland has allows it to command a premium on its gold bars. Some gold refineries are accredited by the London Bullion Market Association (LBMA) as a “good delivery” refiner and as such go through stringent and regular quality checks which can affect cost.This is frequently used as a major unique selling point (USP) by the distribution and marketing chain and can command a premium

Design: A lot of bars are simple bars of gold with no frills. Other refineries have made a case of designing their bars to make them aesthetically appealing. Other refineries have special editions with a logo or symbol on it. Some will be happy to pay a higher premium for these bars.

Whilst the above examples, which may cause slightly higher prices, may not be enough to warrant paying a higher price in your personal view, do not forget that they may also affect the resale value of your bars.

There are also short-term reasons for differences in gold prices. 

Some retailers of gold bars may update their gold bar prices more frequently than others. 

Other retailers may choose to have a higher profit margin on one particular brand than another. 

Whilst those traders with larger inventories, may sell some or all their gold bars more aggressively. This creates difference in retail prices of two equivalent gold bars. 

During volatile gold price fluctuations, some retailers may wish to liquidate stocks of certain brands to raise cash and meet credit or other financial commitments and provide a “discount” or a “special offer” to assist in selling their stocks faster.

Several gold refineries in the Europe, Asia and the Far East and USA that are neither members of the LBMA nor part of the London good delivery list of accredited refiners also produce very substantial amount of gold bars of various dimensions, weights and purities and are active suppliers of gold bars to private and industrial consumers globally. 

All these factors play a role into the pricing of a gold bar for retail sale.

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