Why has selling or buying gold suddenly become so hard?

Gold is known to be a reliable store of wealth in times of crisis. When the economy goes bad or there are political tensions in countries, people move their money from stocks which tend to have a tendency of plummeting at the first sign of instability and put it into precious metals like gold. What happens when precious metals like gold are hard to come by?

Since the beginning of 2020, the price of gold has been going up and up, and both experienced and inexperienced people have heeded the advice of many economists and moved their monies to the precious metal’s market.  However, something peculiar happened, gold dealers everywhere were reporting gold bullion shortages. This has been on a scale that has never been seen before.  People who were used to buying and selling bullion came across prices that were far above the pot price. You would have thought that there would be more gold in the market with rising prices and shortages but it seems that the demand for gold bullion was not being met. Right now, gold dealers really want to buy your gold and if you want to sell gold bullion, right now is the perfect time.

To understand why there is such a shortage of gold in the market one has to go back to mid- March. Back then gold was volatile because of the news of the COVID-19 virus that first broke out of China and was spreading across the globe. The price of gold was volatile then with spreads of $200 and more. The US stock market was the first to react and because of that people began to buy.  A sort of panic buying ensued as people braced themselves for bad news. If it had not been the lockdown rules and travel restrictions, the precious metal market would have been able to handle the sudden demand for gold. But lockdown regulations meant, mines had to shut down in other countries, so did refineries and pretty much everything came to a halt.

Gold dealers were facing delays as refineries were either producing less or nothing at all. And the travel restrictions meant that gold shipping stopped. Gold buyers started facing delays in delivery. Some dealers had gold bullion to sell but took advantage of the situation by increasing their premiums. Take a gold Eagle coin that was priced at 4 percent over spot at the end of the last quarter of 2019, by March 2020, that gold eagle would be priced as 7% of the spot price.   We can’t blame it all on the Corona virus though; the price of gold had been rising for some time before the pandemic broke. COVID-19 simply stoked the flames.

It should also be noted that there has been a huge disparity between the London Spot price of Gold and the gold futures price coming out of New York. Earlier on, the variance was reported to be just over $100 and market analysts believe that this is affecting the buying and selling of gold bullion.

It has become easy and profitable to sell gold bullion but it became harder to find gold bullion at lower prices or even at prices close to spot. What a lot of dealers were finding difficult with buying and selling gold bullion was that it was becoming harder to find gold bullion in smaller denominations as mints concentrated on lowering the cost and the complexity of the gold refining process. Gold dealers shifted focus to the secondary market – gold from people who were liquidating their gold investments and not looking to buy.

 

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