Investing in precious metals such as gold, silver, platinum, and palladium can be a fun and profitable way to grow your financial portfolio.

Precious metals are a secure long-term investment, but there are certain terminologies that you must understand before investing in precious metals.

Here are some important technical terms for first-time investors in precious metals.

1.   Ask Price

Any precious metal’s ask price is the price a dealer sets for a precious metal bar or coin. This is the price the dealer asks the investor to pay, which is also known as the selling price.

2.   Bid

A bid is also known as a buyback price for precious metals. A bid is the amount of money that a dealer agrees to pay the investor in order to purchase back a bar or coin.

3.   Coin Grading

Coins are graded on a special scale called the Sheldon scale, which assigns numeric values to each coin based on their condition.

These conditions include the luster of the coin, its attractiveness, color and preservation, and strike.

The grades on the Sheldon scale range from Poor, which is P-1, to Perfect Mint State, which is MS-70. The scale is divided into three categories:

  1. Circulated (P-1 through EF-40)
  2. About Uncirculated (AU-50 through AU-58)
  3. Mint State or MS (MS-60 through MS-70)

4.   Melt value

Melt value is the value of a precious metal that can be extracted from a coin if it’s melted down. For example, if a coin contains one ounce of silver, which costs $20, the coin’s melt value will be $20.

5.   Markup

Markup is the amount added by the dealer today—the original cost of a bar or coin—which covers overhead and allows them to make a profit on their products.

6.   Spot Price

A spot price of a precious metal is the price at which it is sold or bought in the market for immediate payment and delivery.

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