Gold pricing has been very illiquid and spreads have been widening to unprecedented levels for the past 2 days. We received news from various banks and liquidity providers that the volatility and subsequent spread widening are due to a breakdown in Exchange for Physical (EFP) gold. Accordingly, refineries are shutting down and market makers who had short EFP positions are being adversely affected. Currently the Gold futures market is in contango and the spot and futures prices have widen as much as $70 per oz on 24th March.
Point to note, there is no shortage of Gold in the market, just that at this point of time, demand overwhelms supply and the Gold supply chain is greatly affected due to measures announced by Governments to stem the threat of Covid-19 globally.
Suspension of Online purchases
Due to the recent huge volatility in Precious Metals prices and the influx of orders that have come in, we have temporarily suspended online checkout. This is to allow our team to ensure that the previous orders are all being accounted for and physical inventory are being allocated to these orders. As physical precious metals products are limited in our store, clients who visit us and fully pay for their precious metals purchases will get their physical precious metals or be allocated precious metals that we have secured and slated to arrive in the coming weeks.
Thank you for your kind understanding on this and will try our best to secure good premiums and inventory for our valued customers over the coming weeks.
Price of physical Silver decouples from Silver spot prices
Here at GoldSilver Central, we faced a huge increase in orders since the big selloff in financial & commodities markets on 6 March 2020. Silver prices fell to a low that was last seen 11 years ago. Demand for physical Silver soared globally and coupled with the effects of Covid-19, supply chains globally is affected. Many flights have been grounded or cancelled and many mints and refineries are at half strength due to government advisories to curb the community spread of Covid-19.
Physical premiums for coins went up to more than 250% and for bars it was way higher. The huge hike in premiums is unprecedented. In our 9 years in the Precious Metals trade, this is the 3rd squeeze we have experienced for silver but this is by far biggest challenge to Silver mints and refiners. For example, Perth Mint has just sent a notice to inform all dealers that silver sales has been suspended till further notice due to the backlog of orders due to the sudden influx of the sheer number of orders they have received recently.
Hence we have no choice but to raise the premiums on most of our products. Some of our products we have on hand are still at old premiums, like the Perth Mint 1kg coins so get it before it gets snapped up soon too!
However, do note that this doesn’t mean that the world is facing a shortage of Silver. The refineries have a daily limit on the number of products they can manufacture and when global demand way surpasses that, delivery schedule will delay. Silver, Gold and other Precious Metals have always been a price taker based on the Loco London prices. But this does not reflect the current physical demand that we are facing globally. Therefore we now see a decoupling of physical silver from the Loco London Silver prices. It will not make sense for miners to continue to mine for Precious Metals if prices go below their cost of mining so fundamentally, there is a downside cap for all precious metal prices.
Updates on Gold
As for Gold, GoldSilver Central has also faced an increase in demand too for Gold coins and bars but was not as drastic as the rush for Silver. Demand has increased for Gold way before the recent selloff and demand has picked up since the start of the year.
Premiums have increased too for Gold products but not much as silver, premiums for most gold products still did not increase above 100%.
We have just gotten some inventory of Gold bars in store and still have some inventory of the smaller gold bars and 1oz gold bars while stocks last!
Products clients can consider during this period of high premiums
During this period of increasing delivery time and high premiums, clients can consider other alternatives for buying into Precious Metals.
Firstly, you can look at the Perth Mint Certificate Program (PMCP). Clients can consider buying into the only Government Guaranteed accumulation program in the world. The cost above Perth Mint Precious Metal prices is only 2.25% for Gold, Silver & Platinum. Click here to learn more about PMCP!
Next, you can consider opening a GSC Live! account with us. This will allow you to lock in the precious metals prices for the metal that you wish to purchase and when premiums are back to normal, you can then decide to take delivery of the desired physical product that you were eyeing at the Loco London prices that you have locked in previously. Click here to learn more about GSC Live!
Thank you once again for your patience and understanding on the delays in our replies to emails, online chats and whatsapps and also for the long queues we have faced the past week. We always try to serve you to the best of our ability with as best prices as possible.
We have also secured some shipments in the coming weeks for silver (including some coins) and these will be open for preorders soon so stay tuned to our website and social media channels for latest updates!
Why You Should Swap Your Old Gold Jewellery to Gold Bullion?
Bring forth a case of converting your “useless” jewellery to a form that’s more useful
I believe we have all experienced at least one of the situations below:
- Received Gold jewellery as gifts for wedding, baby full moon shower, special events etc, but you don’t wear Gold jewellery!
- Your current jewellery design is obsolete, or it can’t be worn anymore, broken jewellery, lost one side of the earring and etc
- Your once beloved jewellery is sitting in a box somewhere safely stored aside, but otherwise quite useless
In our eyes, all these represent under-utilized assets! So begs the question, is there a way to better utilize these “old jewellery” other than exchanging new gold jewellery or encash it?
Yes, there is. You can choose to swap your old gold jewellery to LBMA Gold Bars and investment Gold bullion coins.
Why not encash it to SGD and keep it in my bank account then?
Well, that answer boils down to your personal objectives. We all know that keeping all our assets in SGD cash is not the wisest way to invest. (We’ll leave the topic of financial portfolio diversification for another day), but if you see gold as a possible asset class to hold in your portfolio, then swapping your illiquid Gold jewellery to a standardized LBMA format could be a possible way of building up your gold holdings. The general rule of thumb is to have 5-10% gold exposure in your portfolio, but this depends on individuals’ risk profiles. Contact us to speak more about this.
There are generally 2 common forms that clients swap their jewellery to and we have listed them both here for your comparison.
|Costs of swapping to “New” Jewellery||Costs of swapping to LBMA Gold Bullion|
|Tax Rate||7% GST||Tax Exempted|
|Workmanship (Premium)||High||Low – Medium|
|Conversion Cost||High||Low – Medium|
LBMA gold bullion are tax exempted in Singapore, you do not need to pay 7% GST for them. It is priced by spot price (market price) + premium (workmanship), which the conversion cost is relatively much cheaper compare to jewellery that has GST, marked up on gold price and workmanship.
The buy/sell spread for gold bullion is transparent as well, usually it ranges from 1% – 10%. Whereas the sellback of jewellery is normally given a discount of 15% – 18%, after adding 7% GST the spread will be more than 20%. And that does not include the different practices of different shops, such as levying additional administrative costs or having no transparency in the entire process.
An example based on indicative price:
GSC buyback price for 999 jewellery is at $70.10/g, the lowest premium 100g 999.9 gold bar is selling at S$7446.70. Jewellery shop 999 gold price is at $85.50/g. If you were to sell 100g of 999 jewellery and swap it into a 100g gold bar with GSC, you just need to top up $436.70. If you swap your jewellery to new 100g gold jewellery, considering the discount is only at 15% and you need to pay 7% GST, you need to top up $1,881 excluding the workmanship. The difference is obvious.
LBMA gold bullion has assurance of international liquidity. This is very powerful and essentially means that you are not tied to any bullion dealer should you wish to sell. (You could even bring the bar physically to an overseas country to sell if you wish to) When you do the swaps, you unlock more options in terms of how to utilise your Gold in compared to just wearing as jewellery. You won’t need to worry about fashion fads if you decide to pass your precious metals holdings to your children. Moreover, you are in the unique position of having your capital investment appreciate and being able to use that position to move to a better “investment form”, albeit the same asset class, Gold.
Wondering how much is your old gold jewellery worth now? Feel free to visit our website and retail store for free evaluation.