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!
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