Want to Buy Gold Coins Or Bars? Good Luck Finding Any
The comments below are an edited and abridged synopsis of an article by Hanna Ziady
Investors are snapping up gold bars and coins, looking for security as the coronavirus pandemic trashes economies and forces central banks to print trillions of dollars in new money.
But with major gold refineries across Europe shut because of government-ordered lockdowns, online shops out of stock, and many of the passenger planes that move bullion grounded, physical gold is becoming harder to track down.
The strain on supply has been exacerbated by a surge in demand, as investors rush to buy the safe-haven asset amid the global economic and financial market turmoil.
During uncertain times there’s often a flight to gold, because its physical properties make it a good store of value. As central banks print huge amounts of fiat currencies to keep their economies afloat, the intrinsic value of currencies fall.
Investors should be wary of buying gold if it is not yet in the hands of the seller since supply chains are creaking, and it is difficult to predict when more stock will become available.
The crunch isn’t just affecting small investors. The international market is at risk of seizing up too. While London has plenty of 400 ounce bars, getting those bars to New York is proving a challenge.
Gold traders in New York are feeling the squeeze. At one point last week, the difference between the spot price of gold in London and futures contracts trading in New York for delivery of gold in April increased to around $100.
Gold futures contracts enable buyers and sellers to agree in advance a price to be paid when the gold is delivered in future. Spot gold in London and gold futures in New York normally trade within $1 to $2 of one another, reflecting the costs associated with delivering the gold to New York.
The widening gap indicates that the market is unsure if it will be possible to deliver the physical gold in April and make good on the contracts. In other words, it is pricing in a supply shortage.
That prompted the CME to announce that it would launch a new gold futures contract for April, which allows for delivery in 100 ounce, 400 ounce and 1 kilogram gold bars.
DO WE HAVE TO WAIT FOR THE BIG CRASH TO FIND OUT WHO AND HOW THE PRICE OF PAPER GOLD IS BEING FIXED? AND WHY IS THE BULLION PRICE THE SAME? THIS IS WORSE THAN A PYRAMID SCHEME!
While the price of bullion is below what it should be it has done reasonably well despite the paper manipulation.
There are books and numerous article written about how paper bullion, primarily through the COMEX , has kept prices down. I you follow the activity closely you will see that often there have been billions of dollars of paper bullion sold after close of normal trading. This distortion is allowed to continue as there is no limit of the amount of paper gold that can be sold. Eventually this will correct when the COMEX defaults and is discredited and there will be a massive short covering rally.
In the meantime, other than US dollars gold is the best performing asset class.
With most refiners and mints closed because of COVID19 the divergence between paper bullion and physical bullion will continue until the paper price is totally discredited.