‘There Is No Gold,’ Money Manager Says. Bullion Dealers Sell Out In Panic Buying
There are thousands of tons of gold bars sitting in vaults around the world but if you want to buy some as a safe-haven investment, good luck finding any as sales increase five-fold and supply chains falter.
Gold is one of the oldest known methods of storing wealth and there’s thousands of tons of it in vaults around the world, but it’s suddenly really hard to get it when and where it’s needed.
The price of gold appeared to jump 10 percent in the space of a few days to $1638 an ounce — at least that’s close to the official price quoted on Wall Street.
However, the real price is closer to $1,800 if you can get it.
“There’s no gold,” said Josh Strauss, a partner and bullion fan at wealth management firm Pekin Hardy Strauss in Chicago.
Usually, there’s a 2-percent premium to buy physical gold, Strauss said. But this is not business as usual. “There’s a 10-percent premium to buy physical gold for delivery. I can buy a one-ounce American Eagle for $1,800,” Strauss told Moneywatch. “$1,800!”
In times of uncertainty, there’s often a rush to buy gold because its physical properties make it a good place to store value, said Jeffrey Currie, global head of commodities research at Goldman Sachs. “It is dense, cheap to store and much easier to move around than a commodity like oil,” Currie told CNN.
Coronavirus-related restrictions on travel and businesses globally have changed everything.
Canadian gold-dealing giant Kitco reported on Wednesday that it was out of almost all standard one-ounce gold coins. That includes Kruger rands — by far the most widely traded gold coins in the world, issued by the South African government. Also out of stock: American Eagles and Buffaloes, issued by the U.S. Mint; Canadian “Maple Leafs,” issued by the Royal Canadian Mint; “Britannias” issued by the Royal Mint of Great Britain and “Kangaroos” issued by Australia.
Customer service at the U.S. Mint reported having Eagles available, but to buy them direct will cost you $2,175, according to Marketwatch.
As central banks print huge amounts of money in fiat currencies — dollars, euros and pounds — to stay in business, the intrinsic value of money falls.
“We like to call (gold) the currency of last resort,” Goldman Sachs’ Currie told CNN. “When fear sets in and policymakers debase the fiat currencies like they are now, the cost of holding gold relative to holding other currencies declines.”
Giant U.S. dealer Apmex is charging a high premium for physical gold: $1,788 for a one-ounce American Eagle. Gold dealer JM Bullion warned of 15-day-plus shipping delays due to extreme order volumes.
Financial traders on Wall Street mostly deal in paper contracts for gold — basically IOUs that promise to deliver if the buyer ever wants it.
Sales of coins have increased five-fold, according to Rob Halliday-Stein, managing director of BullionByPost, the U.K.’s largest online bullion trader. “It’s unprecedented,” he told CNN Business.
Halliday-Stein warns investors to beware of buying gold if it is not yet in the hands of the seller. It hard to predict when more stock will become available, he said.
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Adding to the supply strain, fewer people are selling the precious metal back to dealers despite the higher prices. Those who do want to sell are affected by travel and work restrictions placed on bullion dealers who have scaled back their operations, Halliday-Stein said.
Much of the world’s gold is stored in vaults in New York, London, and Switzerland. The New York Fed is the largest single depository with 497,000 bars “stacked high on the Manhattan bedrock,” Bloomberg reported.
London, the global hub for the physical gold trade, has plenty of 400-ounce bars (worth more than $420 billion) in its vaults. Getting those bars to New York in 100-ounce bars — the form in which they are traded in the U.S. — has been a challenge as thousands of passenger flights get canceled and precious metals refineries close.