6 ms·

Does this help explain the disconnect between paper and physical gold that started about a few weeks ago?

koolba 7y ago
Shelter in place orders likely caused a chunk of that.
wegymoo 7y ago
the day before all non essential store (precious metal brokers) closed here I went to two and the asking price for silver was double the online spot for physical 1 ounce coins (not a high grade collectors coin just silver rounds)
- 3fe9a03ccd14ca5 7y ago
  It looks like it’s still close to that online at the large sellers, like apmex and Kitco. For example, the spot price for silver is around $15, but the cheap, generic silver rounds are at $20 an ounce, 25% premium. American Eagles 40% premium. Other places not in stock at all.
  - mythrwy 7y ago
    This place has generic rounds silver $3 over spot. Appear to have stock. https://www.coin-rare.com/silver-bullion.aspx https://www.coin-rare.com/silver-bullion.aspx
    - 3fe9a03ccd14ca5 7y ago
      Any experience with them? Seems like a good price to me, even with shipping costs.
      - mythrwy 7y ago
        Ya I ordered a bunch of stuff from them years ago. They have been around at least over a decade and were legit.
- kaycebasques 7y ago
  I've heard that retail sellers deliberately milk the "it's the end of the world" narrative. They price gouge under the guise of "See! The price of physical gold is dislocating from paper money!"
- jurassic 7y ago
  Premiums on physical silver are always pretty ridiculous, even in non-pandemic times. I've always preferred gold because the margins are a lot more reasonable.
kevas 7y ago
I read this last week (forgot where I read it) and haven't been able to find data to support what I read so take the following with a grain of salt. Many investors owned gold as a hedge. The market's downturn happened so rapidly and violently, their other positions took a massive beating. That divergence happened because big players needed to get out of their gold position to cover margin for their other positions.
blihp 7y ago
No, there's often a disconnect between paper and physical metals when there's economic volatility. The same thing happened in '08. The reality is that trading futures contracts (which generally settle in cash) isn't the same as trading the physical metals (where you have broker fees to contend with.) While the physical metals markets are based on the spot price, the discount/premium goes way up during periods of high volatility.
0x8BADF00D 7y ago
That's due to a couple of different things. A lot of people were writing GC contracts w/o actually having physical gold to cover. When some buyers of those same futures contracts wanted to take delivery, those contract writers who took the short position had to now go into the open market and buy gold. However, because of COVID-19, there is very little supply of gold as it is now. A lot of mining companies have no intention of continuing to mine, as they can just give their miners time off and sit on their gold reserves, wait til the price spikes, and start selling their inventory at a 25% markup. That's my theory anyway.
agravier 7y ago
Some insights and speculations about the current issues with the market makers in charge on various flavours of paper gold: https://www.bullionstar.com/blogs/ronan-manly/bullion-bank-nightmare-as-lbma-comex-spread-blows-up-again/ https://www.bullionstar.com/blogs/ronan-manly/bullion-bank-n...

Shelter in place orders likely caused a chunk of that.

the day before all non essential store (precious metal brokers) closed here I went to two and the asking price for silver was double the online spot for physical 1 ounce coins (not a high grade collectors coin just silver rounds)

3fe9a03ccd14ca5 7y ago
It looks like it’s still close to that online at the large sellers, like apmex and Kitco. For example, the spot price for silver is around $15, but the cheap, generic silver rounds are at $20 an ounce, 25% premium. American Eagles 40% premium. Other places not in stock at all.
- mythrwy 7y ago
  This place has generic rounds silver $3 over spot. Appear to have stock. https://www.coin-rare.com/silver-bullion.aspx https://www.coin-rare.com/silver-bullion.aspx
  - 3fe9a03ccd14ca5 7y ago
    Any experience with them? Seems like a good price to me, even with shipping costs.
    - mythrwy 7y ago
      Ya I ordered a bunch of stuff from them years ago. They have been around at least over a decade and were legit.
kaycebasques 7y ago
I've heard that retail sellers deliberately milk the "it's the end of the world" narrative. They price gouge under the guise of "See! The price of physical gold is dislocating from paper money!"
jurassic 7y ago
Premiums on physical silver are always pretty ridiculous, even in non-pandemic times. I've always preferred gold because the margins are a lot more reasonable.

kevas 7y ago

I read this last week (forgot where I read it) and haven't been able to find data to support what I read so take the following with a grain of salt. Many investors owned gold as a hedge. The market's downturn happened so rapidly and violently, their other positions took a massive beating. That divergence happened because big players needed to get out of their gold position to cover margin for their other positions.

blihp 7y ago

No, there's often a disconnect between paper and physical metals when there's economic volatility. The same thing happened in '08. The reality is that trading futures contracts (which generally settle in cash) isn't the same as trading the physical metals (where you have broker fees to contend with.) While the physical metals markets are based on the spot price, the discount/premium goes way up during periods of high volatility.

0x8BADF00D 7y ago

That's due to a couple of different things. A lot of people were writing GC contracts w/o actually having physical gold to cover. When some buyers of those same futures contracts wanted to take delivery, those contract writers who took the short position had to now go into the open market and buy gold. However, because of COVID-19, there is very little supply of gold as it is now. A lot of mining companies have no intention of continuing to mine, as they can just give their miners time off and sit on their gold reserves, wait til the price spikes, and start selling their inventory at a 25% markup. That's my theory anyway.

agravier 7y ago

Some insights and speculations about the current issues with the market makers in charge on various flavours of paper gold: https://www.bullionstar.com/blogs/ronan-manly/bullion-bank-nightmare-as-lbma-comex-spread-blows-up-again/ https://www.bullionstar.com/blogs/ronan-manly/bullion-bank-n...