Fair Value
Premium and discount
A premium or discount is how much a local bullion price sits above or below a reference fair value. A local premium can reflect strong physical demand, tight supply, or import costs, while a discount can signal weak demand or excess supply.
Premium and discount describe where an observed local price sits relative to a chosen model or reference. A local premium means physical or exchange prices are trading above fair value; a discount means below. In India these gaps often reflect physical-market demand, liquidity, timing, customs duty, and the cost assumptions in the model.
For a bullion trader, premiums are a window into the physical market. Festival and wedding demand can push spot premiums higher even when futures look calm, while soft demand or heavy supply can open discounts. Comparing premium behavior over time helps separate a one-off print from a persistent condition.
A persistent premium is context to investigate, not an automatic convergence trade. It may reflect real structural costs rather than a mispricing, so it is read alongside duty, freshness, and the rest of the fair-value picture.
Put it to work
Educational reference only. Definitions describe how traders use these concepts and are not investment advice or a recommendation to trade.