Gold dealers make money in five main ways: the spread between their buy and sell prices, premiums layered on top of spot, wide margins on scrap jewelry, recurring service fees, and storage or retirement-account income. With gold trading above $5,000 per ounce in early 2026, even a small percentage on each transaction produces meaningful profit, and the whole business is built to earn that percentage without betting on which direction gold moves next.
The Bid-Ask Spread
Every dealer quotes two prices. The bid is what they will pay you. The ask is what they will charge you. The gap between them is the spread, and it is the most fundamental source of revenue in the business. If spot gold sits at $5,150 per ounce, a dealer might bid $5,100 and ask $5,200. That $100 window is captured on every round trip through the shop.
Spreads on plain one-ounce gold bars tend to be the tightest, often in the low single-digit percentage range. Popular one-ounce coins like the American Gold Eagle carry slightly wider spreads, typically mid-single digits, because they command higher premiums and stronger retail demand. Smaller or less liquid products carry wider spreads still, since the dealer has to work harder to find the next buyer.
During market panics or supply disruptions, dealers widen spreads. When everyone wants to buy, the ask climbs; when everyone wants to sell, the bid drops. That is a risk adjustment: the dealer is compensating for the increased chance that prices move before inventory turns over. If you are selling into a crash, expect to leave more on the table than you would in a calm market.
Premiums Over the Spot Price
Spot is the theoretical price of raw gold on the commodities market. Nobody buys raw gold. You buy a coin, a bar, or a round that someone fabricated, stamped, shipped, and insured. The premium is the surcharge above spot that covers all of that plus the dealer’s margin. Spot is the wholesale ingredient. The premium is the restaurant markup.
Modern bullion coins from government mints typically carry premiums of 4% to 10% over spot. At $5,150 gold, that means you might pay $5,360 to $5,665 for a one-ounce coin. American Gold Eagles and Canadian Maple Leafs tend to sit at the low end in normal markets, but premiums spike when investor demand surges and mints fall behind on production.
Fractional coins carry disproportionately higher premiums. A one-tenth-ounce coin might run 10% to 15% over spot because the fixed costs of minting, packaging, and handling get spread across a much smaller amount of metal. Dealers know this is where margins are fattest, which is why smaller coins get heavily promoted to first-time buyers.
Numismatic Coins
The premium picture changes with collectible coins. A pre-1933 U.S. gold coin in common condition historically traded at 20% to 60% above its melt value over the last 30 years. In the current market with gold above $5,000, many common-date numismatic pieces have compressed to 0% to 5% above melt because the underlying gold value has risen faster than the collector premium.
The buy-sell spread on numismatic coins runs wider too, often 5% to 12%, compared to the low single digits on plain bullion. This is where dealers earn outsized profits and where unsophisticated buyers get hurt. A “rare” coin sold at a 40% premium needs gold to rise 40% before the buyer breaks even.
Buying Scrap Gold
Buying scrap from walk-in customers is one of the highest-margin activities in the business. When someone brings in broken jewelry, dental gold, or unwanted inherited pieces, the dealer tests purity, weighs the metal, and makes an offer. That offer typically runs 70% to 90% of melt value, depending on the shop’s business model and local competition.
The dealer accumulates scrap until there is enough to sell in bulk to a refinery, which pays 96% to 98% of spot. The profit is the gap. On a $500 melt-value necklace, a dealer paying 75% ($375) and receiving 97% from the refinery ($485) nets $110 on a single piece. Multiply that across dozens of purchases a week and the math gets compelling.
Testing accuracy shapes the offer. Dealers who invest in portable X-ray fluorescence analyzers can read composition in seconds without damaging the piece, which lets them pay closer to melt while still protecting margin. A dealer relying on cheap acid tests tends to lowball every offer as a hedge against imprecise readings. Either way, the equipment and training are overhead that gets recovered from the spread.
Commissions and Service Fees
Beyond spreads and product premiums, dealers earn from a menu of service fees that buyers often overlook at checkout.
Brokerage Commissions
When a dealer acts as a broker matching the seller of a high-value numismatic coin with a buyer, they charge a commission rather than taking inventory risk. These commissions typically run 5% to 15% of the sale price, with rarer pieces at the higher end because the buyer pool is smaller and authentication expertise adds more value.
Storage and Vaulting
Dealers who offer allocated vault storage earn recurring annual fees, usually 0.5% to 1.5% of the stored metal’s value. At current prices, storing $100,000 of gold costs $500 to $1,500 a year. This revenue is attractive because it does not depend on transaction volume. Whether the market is booming or flat, the storage fees keep coming.
Gold IRA Administration
Physical gold held in an Individual Retirement Account is a growing business, partly because the fee structure has multiple layers. Federal tax law requires that IRA gold be held by a qualified trustee or custodian at a third-party depository; storing it at home or in a personal safe deposit box triggers a taxable distribution.1Office of the Law Revision Counsel. 26 USC 408 – Individual Retirement Accounts The metal must also meet minimum fineness standards tied to CFTC-approved contract specifications, with certain government-minted coins like the American Gold Eagle qualifying by statute.
That mandatory custody structure means the investor pays setup fees, annual account maintenance, and depository storage, and much of it flows through or originates with the dealer who sold the metal. The dealer profits on the initial sale premium and then earns ongoing referral or administrative income from the custodian and depository relationships. It is a recurring revenue model built on regulatory requirements the investor cannot opt out of.
Shipping and Insurance
Delivering gold requires registered mail or armored courier service with full insurance. USPS Registered Mail allows insurance up to $50,000 per shipment at a starting price of $19.70, plus $8.40 for restricted delivery.2USPS. Insurance and Extra Services Dealers pass these costs on and often mark them up. A “$29.95 shipping and handling” charge on a single-coin order usually exceeds the actual postage by enough to contribute a few extra dollars of profit per shipment.
Hedging Is How Margins Survive
A dealer sitting on $2 million of gold inventory is not betting that gold rises. Most dealers do not want price exposure at all. They want to earn the spread and premiums regardless of tomorrow’s price.
The standard approach is opening short positions in gold futures contracts that gain value when the price drops. If physical inventory loses value in a decline, the futures position offsets the loss. If gold rises, the inventory gains and the futures lose the same amount. The net effect locks in the profit margin from the moment of purchase.
This is why dealers can offer relatively stable buy and sell prices even during wild intraday swings. The hedging book absorbs the volatility so the retail business does not have to. Maintaining margin accounts and trading infrastructure is meaningful overhead, but it separates a sustainable dealership from one quietly gambling on direction.
Compliance and Authentication Overhead
Dealers in precious metals operate under federal anti-money laundering rules administered by FinCEN. Any covered dealer must maintain a written AML compliance program, appoint a compliance officer, train staff, and submit to independent testing.3eCFR. 31 CFR Part 1027 – Rules for Dealers in Precious Metals, Precious Stones, or Jewels The regulations require watching for red flags such as unusually large cash payments, refusal to provide identification, or transaction patterns outside normal industry practice.
Any cash transaction above $10,000 also triggers a Form 8300 filing to FinCEN, and structuring transactions to stay under that threshold is a federal crime.4Internal Revenue Service. Form 8300 and Reporting Cash Payments of Over $10,0005Office of the Law Revision Counsel. 31 USC 5331 – Reports Relating to Coins and Currency Received in Nonfinancial Trade or Business Dealers are trained to watch for it.
Authentication is another overhead line. Sophisticated counterfeits, particularly tungsten-filled gold bars, represent a real threat because tungsten’s density of 19.25 g/cm³ is almost identical to gold’s 19.3 g/cm³, so a tungsten-cored bar with a gold shell can pass a simple weight-and-dimension check. Reputable dealers invest in XRF analyzers, ultrasonic thickness gauges, and specific-gravity testing equipment. A quality XRF unit alone can run $10,000 or more. When a dealer charges a testing fee or builds verification into the spread, this is what they are recovering.
All of this compliance and detection cost gets distributed quietly across every transaction. You will not see a line item for AML program audits or counterfeit-testing equipment on your receipt. It is part of why even the most competitive online dealer cannot sell at spot.
What This Means When You Buy or Sell
The revenue map above gives you the levers to push on. Standard bullion products carry the tightest spreads, so if your goal is tracking the gold price rather than collecting, stay with plain one-ounce coins and bars. Fractional coins and numismatics look appealing but hand more margin to the dealer. If you are selling, get more than one offer, because the range between a shop using an XRF analyzer and one relying on acid tests can be several percentage points of your metal’s value.
One boundary worth noting: sales tax on bullion depends on where you live. About 42 states exempt qualifying gold bullion and coins, but the rest do not, and combined state and local rates can exceed 10% in taxing states. Some states with exemptions also set minimum purchase thresholds, commonly $1,000 to $2,000, below which tax still applies. That tax is not dealer revenue, but it stacks on top of the dealer’s premium, so a 7% sales tax on top of a 5% premium means you start 12% in the hole. Check your state’s rule before you buy.