According to this page linked to by bron (see comments) the unusually large spread between the two is due to delays in converting wholesale gold to a retail form (e.g. stamped bullion) leading to a shortage of gold available for retail sale.
Does this put paid to the argument put forward on various blogs (e.g. here) that the paper market is becoming decoupled from the physical market? It would seem that the COMEX futures market is pretty much in line with the London Fix, so perhaps bron is correct in suggesting that the spread is due to retail demand outstripping retail production, not actual availability?
What do you think? Please leave a comment below.
ORIGINAL TEXT: [The gold prices published in the media are for contracts for delivery and are NOT an accurate reflection of the price of real, physical gold. This chart shows the variance between the two over the past two weeks. (Physical prices are based on bullion bar transactions on US ebay). ]
5 comments:
Paul, I assume that by "London" on your chart you mean the London Fix? If so then that is a real price, just for wholesale physical. See http://goldchat.blogspot.com/2008/10/price-finding-mechanism.html for more info. You would be better of using the actual COMEX price.
It is a bit unfair to then be comparing prices between bulk wholesale forms of gold to small retail forms. I would suggest using http://www.perthmint.com.au/metalPrices.aspx or Kitco as an indicator of "normal" retail prices (I can certify that real physical deals are being done at these prices) and then compare that to the ebay price to get a fair comparison as to how much people are having to pay to get metal when they want it.
I think a chart of futures prices, then London Fix (ie wholesale market), normal retail prices and then ebay prices would give more info on the multiple levels the market is operating on.
Thanks for setting me straight bron. I have updated the post accordingly.
According to the goldchat link you gave, the current high premium between wholesale and retail is due to inability to keep up with retail production demand - i.e. there's plenty of gold available but it can't be converted to a retail form quickly enough.
Do you agree with that?
Sorry Bron - just realized that you wrote that on the linked page, so obviously you agree with it.
I think you are providing a valuable service by tracking ebay prices.
While the London Fix is only done twice a day and isn't a 24hr market, it is the closest one will get to a real "base" price for gold and perfectly suitable for your purposes.
When you think about it, there are tonnes and tonnes being mined every day, so obviously there is plently of gold. But inability of the industry to convert that quickly enough to meet retail demand means less physical coming off the market and stored in individual hands. This prevents the gold price from rising as much as it could.
Hi Paul
Can you please email me over your chart?
Thanks
nick(@)bgmi.us
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