Bid/Ask Spread

IndieIndigo · December 1, 2017

I have a question about the bid/ask spread with gold. As I understand it, some gold dealers buy gold at/above/below spot price and sell it for auction on eBay, then a lot of gold dealers buy gold from the public below spot. And then others buy gold and wait for the spot price to go up before selling. Others profit by selling numismatic gold (or other metal) coins. There are many different ways in which gold dealers buy and sell. But when it comes to the bid/ask spread, someone asked it perfectly:

"Silver shows bid $17.97 and ask $18.03 plus I have seen a few sights give a bid and ask price for silver coins such as 90% halves. Can someone explain this to me? It seems like "bid" would be the buy price and "ask" would be the sell price but that does not makes sense as it would mean I should buy silver for $17.97 and sell it for $18.03 today which means $0.06 for my time and trouble..." (Cited from: https://www.cointalk.com/threads/bid-vs-ask.121778/).

The answers still don't seem to make much sense, I'm the type of person that needs to see examples. I understand the "short sell" and "long position" terminology, however... How are you making a profit with such a small spread? Is the profit made based on the volume of gold you buy and sell? If you can try to explain this as if you were explaining it to a kindergartner, that would be helpful. Please kindly don't answer if you're going to say "just buy gold and sit on it", "you don't qualify to start, you're just a newbie and it'll all be too over your head", "my advice: not to do it", or "you're better off doing this or that" or something else equally unhelpful. I merely just want to understand it better. I'm aware this may sound like a stupid question to some people, but all gold dealers are not born with knowledge about how the gold business works, everyone has to start somewhere as far as learning it goes. Thanks.