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Gold delivery bottlenecks due to Corona?

The corona crisis is also affecting the gold industry. Some mints had to close and supply chains can no longer be maintained - many investors are waiting for their gold. However, the demand for gold is particularly high in times of crisis. Dominik Lochmann, Managing Director of ESG Edelmetall-Service GmbH & Co. KG, explains why the stock market price and the price of physical gold are so different from each other in the current crisis.

Due to the corona crisis, the price for gold that can be physically delivered immediately and the cost of paper gold, i.e. the stock exchange price for gold, have differed more than usual. Precious metal prices arise on the international stock exchanges. There, many wholesalers and funds have currently had to sell off parts of their gold due to COVID-19, as money was needed for upcoming obligations or necessary portfolio requirements had to be met. Because of this, the gold price initially fell. Nonetheless, precious metal traders are currently experiencing very high demand, a veritable run on gold. Since precious metal is traditionally a safe and stable investment, private investors are currently investing more and more in tangible assets. Many people fear a recession in which their money will lose its value.

Investors fear inflation

Investors also fear that the market will be flooded with freshly printed money in order to stimulate the economy again after the crisis. Should a financial crash occur sooner or later, one kilogram of gold always remains one kilogram of gold. In addition to the increased demand, the fact that numerous mints had to close temporarily or reduce their production due to the coronavirus, which leads to a significantly limited supply of coins and bars, is also driving up prices. The transport of raw gold from mines to refineries and from mints to wholesale centers has also become significantly more expensive, as airlines have suspended most international flights and freight rates have multiplied as a result.

Deviations from the paper gold rate

Due to these production and logistics bottlenecks and the greatly increased demand, prices are currently on the market that differ greatly from the price of paper gold. As a result, the premium for bars and coins has increased. Anyone who compares the prices of physical gold products should definitely pay attention to the specified delivery times. Anyone who buys gold at the high premium now and may not receive it until months later may be better advised to wait until the markets have calmed down again. If you order now and would like to have the goods in your hand within a few days of ordering, you should order from dealers who really only offer goods that can be delivered immediately. In general, investors shouldn't see panic and hysteria as reasons for investing, but should keep thinking long-term.

Photos: ESG Precious Metals Services, Shutterstock