Coronavirus Adversely Affects Supply of Gold Bars

Retail investors scout for gold bars and coins as a safe investment option

: IJ News Service
24 March 2020 11:26 AM
Reference: 12332
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Gold bars are in shortage all over the globe, owing to the outbreak of the coronavirus, which has affected both demand and supply of gold bars and disrupted trading altogether. In some parts of the globe, traders have reported a frenzied rush to buy gold. Retail investors in Europe and the US have bought up gold and silver bars and coins over the past two weeks so as to protect their money from the collapse in global stock prices. 

On the other hand, Europe’s gold refineries are struggling to stay in business because of the massive shutdown across the region. In regions of: Valcambi, Pamp and Argor-Heraeus where a majority of those are based in the Swiss region of Ticino, near the border with Italy. Local authorities have stopped all refined gold production in the area.

The gold price hit a seven-year high on March 9 of more than $1,700 a troy ounce as the deepening economic impact of the coronavirus outbreak forced investors to scout for safe investment options, and gold has been leading their preference list for a long time. But gold has since been swept up in the selling frenzy, with some investors needing to offload their holdings to free up cash, pushing the price down to about $1,530 on March 23. Most of the selling has been in gold futures or exchange traded funds backed by the metal. During the same period, retail demand for physical gold bars has surged. 

Retailers have already reported shortages and delays of up to 15 days on shipments. Markus Krall, chief executive of German precious metals retailer Degussa, has said that it was struggling to meet customer demand for gold bars and coins and had to turn to the wholesale markets. Demand is running at up to five times the normal daily amount. 

Most retailers are selling as soon as they get the stock on location in secure vaults. While London’s gold vaults are full of gold bars, they are of the 400-ounce variety traded by large banks such as HSBC and JPMorgan, not the smaller bars that retail customers buy, which tend to be 1kg (35 ounces) or lighter. 

Retailers in London and the USA, especially those like; Apmex, American Gold Eagles, JM Bullion, et al are getting orders for gold bars, but owing to the acute shortage in the market and disrupted transportation facilities across the globe, there could be a delay of 15 days in fulfilling these orders. Retailers are unsure when the situation will be corrected and are hoping for the best in the months to come.

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