Are Gold Prices Failing to Reflect Shortages of Gold Bullion? No.
August 17th, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
There are some stories floating around saying that the U.S. Mint has suspended sales of American Eagle gold coins. I haven’t posted these stories because, as I write this, the U.S. Mint continues to take orders for the coins. The U.S. Mint has suspended sales of the coins in the past, and the website clearly indicated that fact.
However, people keep submitting this information to me, so let’s look at some statements from a GATA story from yesterday:
…through their agents the bullion banks the Western central banks, desperate to prop up a corrupt and tottering financial system, have put gold so much on sale that even the U.S. Mint can’t find any now. The price reported from the commodities markets is a fiction — a scary one, perhaps, but a fiction no less.
Don’t get me wrong here, because I love a conspiracy as much as the next guy (and dealing with ‘conspiracies’ is part of my full time work on this site), but the statement above makes no sense.
Go to BullionVault.com and look at the real time prices displayed on the front page. BullionVault features a large, private gold bullion market that is always open for trading. BullionVault trades only allocated, Good Delivery gold bullion. All trades require payment in full. There is no credit, margin, leverage, lending, etc.
If, “The price reported from the commodities markets is a fiction,” surely the prices in a totally non-leveraged physical bullion market would reflect the discrepancy, right?
Kitco shows the spot market close (it’s the weekend now) at bid/ask 786.00/788.00.
BullionVault’s live price (trades 24/7) in the Zurich facility is bid/ask 785.42/788.32. Zurich has the most liquidity and the smallest spreads. The spread is wider during weekend trading.
Every transaction on BullionVault represents a transfer of ownership of physical gold bullion from one party to another. The prices are set by market participants who are willing to sell the physical gold that they already own.
What might we conclude from this?
There is no shortage of gold because the allocated market on BullionVault is indicating order flow with prices that are right in line with spot prices. If there was actually a shortage of gold, prices on allocated gold would be higher.
Note: I am a BullionVault client and affiliate.
