What is Bid Price vs. Ask Price?
As the old Rolling Stones song noted, “You Can’t Always get What you Want,” and that is a good starting point for understanding the basics of what is a “Bid Price Ask Price.” At its most basic, the term refers to a two-part price quotation system, which represents the best price under which investors can expect to buy (bid) or sell (ask) a security at a specific point and time. These prices are usually different even though they reference the same product.
This difference, referred to as the “spread,” represents the implied cost of trading your precious metals. Additionally, that difference, the spread, indicates exactly how liquid the market is at that point in time, so beyond marking how much you can expect to add or subtract to your account balance, the spread indicates how easy it will be to make that particular transaction. In other words, the smaller the spread, the better liquidity in the market.
Bid Price—the price a buyer is offering to pay at that moment for a given amount of gold and silver.
Ask Price—the price a seller is willing to accept to sell a given amount of gold at that moment in time.
All markets, from precious metals to soybean futures operate under a bid price/ask price market scenario. As such, a “listed bid” always represents the highest offering at any given point and time.
While there may be hundreds, or even thousands of other bids, none will be higher than the listed bid. Conversely, “listed ask” represents the lowest asking price at that particular time. Again, while you can assume hundreds of other listed ask prices, none will be lower than the officially listed ask price.
This status will remain unchanged until someone essentially blinks. Either a buyer will raise his or her bid to match the ask price of a seller, or a seller will lower their asking price to meet a buyer’s offer. Again, the difference paid between the bid and ask price represents the operating cost of the bullion market maker to help cover the cost of running their operation while building in their profit margin on each transaction.
If you were ready to sell off a portion of your coin collection, you would begin by looking for a reputable bullion dealer. While you can hawk your wares at local coin stores and pawn shops to take an immediate payout home in your pocket, dealing with a reputable bullion dealer that specializes exclusively in the trading of precious metals offers peace of mind knowing that you are receiving the best possible price for your collection.
Since these organizations know exactly what your item is worth, you will be able to work towards getting the highest price possible when you cash in your collection for sale. As an added benefit, if you reach out to a bullion dealer to find that the prevailing bid price on gold does not meet your expectations, you can also reach out to see if your silver collection would fetch a better price. Bid price and ask price represents pricing in action, so understanding the dynamics of this two-part price quotation system gives you a solid understanding of what you are paying for when you buy bullion.
The primary concern of any investor is the issue of liquidity. After all, you might get a great deal on a fixer-upper house, but unless it is in an attractive neighborhood for buyers, you will be stuck with a nicely fixed up property that you would be unable to take off your books with a sale. Essentially, the more liquid a commodity is, the more in demand or rare, the easier it will be to sell it when the time comes to cash out. By keeping an eye on the spread indicated in the Bid Price/Ask Price listings, you will develop an appreciation for just how liquid your precious metal collection is at a given point in time