Unaffordium and Unobtanium
Please consider Coronavirus Sparks a Global Gold Rush by WSJ writers Liz Hoffman, Amrith Ramkumar and Joe Wallace.
It’s an honest-to-God doomsday scenario and the ultimate doomsday-prepper market is a mess.
It’s getting so bad that Wall Street bankers are asking Canada for help. The Royal Canadian Mint has been swamped with requests to ramp up production of gold bars that could be taken down to New York.
“When people think they can’t get something, they want it even more,” says George Gero, 83, who’s been trading gold for more than 50 years, now at RBC Wealth Management in New York. “Look at toilet paper.”
David Smith owns a wristwatch business in northern England and said Tuesday his bullion dealers weren’t taking any more orders. He has been scouring social media for individuals who might sell to him.
“You can’t really get physical gold and silver anywhere at the moment,” he said.
More Gold Headlines
- Financial Times: Gold Bars in Short Supply Due to Coronavirus Disruption
- Los Angeles Times: Gold Faces Historic Squeeze with Coronavirus Threatening a Shortage
- Kitco asks: Worried About Gold Shortage?
What About Silver?
If you dive into the LA Times article you find this interesting piece of information.
“We have a situation where there is silver available but no one will deliver it. They won’t load the trucks. They won’t load the planes because the coronavirus. Even though there is product around they won’t pick it up,” said Peter Thomas at the Zaner Group.
The article also noted that Switzerland’s refining industry, a major hub for processing gold into bars and coins, has largely shut down because of the virus.
Is that a physical shortage or a delivery issue?
In the near-term, one might argue there is little difference, but as a practical matter, nearly ounce of gold ever mined is part of current supply. The incremental supply from miners is trivial.
No Shortage of Gold, Shortage of Some Forms of Gold
That’s the problem. There is a shortage of some forms. We have seen this before and we will see it again.
It is easy enough to buy gold and silver at Goldmoney.
I bought silver today at Goldmoney.
If you insist on forms in limited supply, yep, the price is high. https://t.co/ES2JlFmbew
— Mike “Mish” Shedlock (@MishGEA) March 30, 2020
If you see things as I do, there is no shortage of gold, but there are shortages of some forms of gold, primarily due to delivery issues
Here’s another WSJ headline: Precious Metals Shoot Higher as Gold Shortage Bites
The inside story explains what’s really happening.
LBMA-approved bars weigh 400 troy ounces, while Comex futures must be settled using either one bar weighing 100 ounces or three bars weighing a kilogram each.
There is plenty of gold but it sits in London in 400 ounce bars while Comex needs 100 ounce bars. There are both delivery disruptions and smelting disruptions.
The LBMA and Comex discussed whether to allow traders to settle futures using gold from London without having it melted down and recast into a new set of bars, according to a person familiar with the matter.
It is ridiculous to recast these bars.
US Mint Prices
You can get Gold and and Silver Eagles Coins at the US Mint but it would be unwise to do so.
The gold spot price at the time of this article was $1597.35 and the spot price of silver was $14.188.
The Gold Eagle costs $2,175.00. That is a markup of 36.2%.
Silver Eagles are even more ridiculously priced. A 2019 Silver Eagle will set you back $55.95 while the 2020 Eagle will set you back $64.50.
The spot price of silver is $14.188. The markup is 294% on the 2019 silver Eagle. The 2020 Silver Eagle markup is 354%.
OK these coins are pretty. And they may appeal to collectors. But if all you are just looking to get physical metal, this is a very poor way of going about it.
Unfortunately, hyperinflation shills use those prices as the purported measure of the price difference between physical gold and paper gold.
Comment From Goldmoney founder James Turk
I asked James Turk, the founder of Goldmoney, to chime in on the issue.
Turk responded “If the price is right, there are never shortages. There is plenty of gold and silver in all forms of bullion coins and bars, even now. But much of this metal is in so-called ’strong hands’, meaning that it is going to take much higher prices to entice them to exchange their physical precious metal for fiat currency.”
Goldmoney Real-Time Pricing
Goldmoney provides Real-Time Pricing in Four Metals.
At 2:17 PM on March 31, the spot price of gold was $1597.35 and the spot price of silver was $14.188.
Goldmoney vs Spot Price
- Goldmoney Gold Buy Price: $1,613.76 – Buy Markup Over Spot: (1613.76 – 1597.35) / 1597.35 = 1.03%
- Goldmoney Silver Buy Price: $14.20 – Buy Markup Over Spot: (14.57 – 14.188) / 14.188 = 2.69%
Those are the price differences between physical gold and paper gold if you buy smartly.
Goldmoney spreads put a huge spotlight on alleged monstrous differences between physical metals vs “paper”.
If you are paying larger markups for physical gold and silver, then you are paying too much!
Physical Gold That I Trust
- Goldmoney
- Bullionvault
- OUNZ
OUNZ is a ticker symbol. The product was started by Axel Merck.
Those are by no means the only places one can trust. Rather they are products that I am familiar with and endorse. Note that BitGold is now part of Goldmoney.
Some want gold in their possession. Both OUNZ and Goldmoney have delivery mechanisms.
I prefer not to deal with insurance issues.
My Long Term Beliefs
I believe holding physical gold (or gold and silver) is a good idea. Gold is safer (less volatile) than silver and I would recommend overweighting gold vs. silver. Silver is an industrial commodity and might get hit much harder in another economic slump.
In general, I do not recommend purchasing gold and silver coins and small bars because the markup is generally very high. There are additional concerns and risks should you want to sell your holdings. Finally, should you decide to take delivery yourself, there are ongoing storage concerns, including insurance.
Allocated Storage
Three popular choices for holding gold in vaults are GoldMoney, BullionVault, and Perth Mint.
GoldMoney and BullionVault offer allocated programs. In allocated programs you have title to what you purchase.
Perth Mint offers allocated and unallocated programs. It’s important to distinguish between the two. Unallocated gold is a financial asset; you own a liability of the Perth Mint. You do not own metal.
The Perth Mint does offer allocated storage, but is very expensive. Perth Mint charges 1.00% per annum for storing gold.
Goldmoney charges 0.12% at most locations, 0.18% at others per its fee schedule.
Perth maintains that its unallocated program is 100% metal-backed, but also admits theoretical exposure should the Mint becomes insolvent. However, Perth Mint operates under a Government Guarantee that many will find sufficient.
GoldMoney holdings are in audited vaults in Singapore, Hong Kong, Canada, London and Switzerland. The bars are individually numbered and assigned. You may own a percentage of a bar.
GoldMoney, which was founded in 2001 and is storing nearly $2 billion of client assets, is based in Canada, and traded on the Toronto Stock Exchange. It has an office in Jersey, an English speaking country off the coast of France. Jersey, which is an important financial center, has some of the strongest property rights laws in the world.
GoldMoney sells at the market ask plus a mark-up. BullionVault is commission based on top of a bid-ask spread. BullionVault’s combined commission + spread may at times be lower than the mark-up at GoldMoney. However GoldMoney guarantees a trade, they are a broker dealer.
The following applies to US citizens:
I am not a tax accountant but please remember that offshore accounts are taxable and must be disclosed to the IRS. Only the gains are taxed when you sell, not the holdings.
Reporting of Foreign Bank and Financial Accounts may apply to accounts that total in excess of $10,000. Please see for more information.
Goldmoney Relationship
In the sake of full disclosure, I have a relationship with Goldmoney.
Specifically, I am in their affiliate program and have been for over a decade.
Interested in GoldMoney?
If you decide to open up an account with GoldMoney, please use my GoldMoney Referral Link. It costs you nothing more, and it will not affect the price you buy or sell at.
Mike “Mish” Shedlock
Please note, that Goldmoney’s storage fees are “monthly”, where Perth Mint’s are “annual” fees. The “monthly fees” for gold at Goldmoney are 0.01% – 0.018%. A holding of US$50,000 in gold at 0.01% = $864 annually. A holding of US$50,000 at 0.018%= US$1,080 annually. A small safety deposit box at a Bank of America is US$51/yr. I seriously doubt that the big banks locations are going to close, as in the Great Depression. That would send a serious message to the multitude, that things are really bad. Not going to happen.
Mish, wouldn’t failure to deliver Comex bars and replacing them with LBMA bullion be the same as the 1976 potato futrures failure, when longs insisted on recieving maine potatoes even though there were alternatives?
Mish – opened an account with GoldMoney but there’s nothing indicating that I was referred by you.
Mish says over and over again there won t be hyperinflation so what s the point of buying PMs ?
Love Brussels….(notwithstanding fact that the weather is truly abysmal). Mussels and beer are great.
To the point…….
Gold is to protect value – not necessarily to protect against inflation.
Gold preserves value – its purpose is not out-perform….
Thank you Mish, particularly for your discussion on the gold/silver coin premium. Commonsense vanishes in a panic, especially when it is fanned by bullion dealers.
Which company are you recommending for the best price for taking physical delivery of gold/silver coins or bars?
If push comes to REAL SHOVE it won’t matter whether you own “paper gold” or gold in a vault somewhere or have it in your possession … it will all be sought out and seized by TPTB and taken by force if you or the holders try to resist.
And in that case, they can come and attempt to STEAL it from me and risk being shot in the face while trying.
Unless you are rather wealthy, it’s just not worth it for government to dig up your entire property looking for a gold bar.
But if it is stored in an audited vault, things aren’t so difficult anymore. Used to be you could trust Switzerland and its banks to not rat out clients to any two bit regime able to manufacture some nonsensical “warrant,” but you can’t anymore. Singapore may still be a bit better, but I doubt it is to any meaningful degree.
In any current “financial center”, the people there make the overwhelming share of their money the same way they do over here now: by robbing people who had to work for their money.
It no longer matters whether you are talking Hong Kong, Singapore, Switzerland, London or New York. They live off government sanctioned looting now. Not off of being good at anything, like safeguarding clients’ savings.
It wouldn t surprise me at all….and ‘Europe’ might just confiscate part of +100K saving accounts ….when push come to fckn shove….
You might have thought I meant The Powers That Be … maybe … but maybe I meant The Powers Toting Bazookas.
Thanks for this information. Considering OUNZ now.
How about ´not available´ gold supposedly vaulted at the BoE for decades with NO independent audit ever ? Paraphrasing James Carville, “it´s the gold, stupid ”
The flight to gold is a fear trade not a quality trade. Anyone buying now will more than likely end up losing money if they hold for 6 months.
You have no rationale about the likelihood of losing or making money.
I do. US deficits headed to the moon. And what about Confidence in central banks?
Not really. If you put dollars in a bank you’re lending it to them to do what they want with for next to no return. Over time the cash devalues. At the moment if you buy the debt of any decent credit you get next to no guaranteed return for it. If you buy an ounce of Gold it’s always an ounce of Gold.
This blog post is an advertisement.
Mish made full disclosure of his interest in one type of gold investment he recommended; he analyzed several gold purchase alternatives; and, he discussed the erroneous impression that the WSJ article might have left on some readers. With this information, each of us (coupled with other research sources) can make our own informed decision whether to buy gold and if it is a smart investment. Unless you think gold is a wholly worthless investment, what’s your beef with the piece?
If Gold is Money, you can always buy GLD, like I have (paper gold = money).
Check out OUNZ rather than GLD, it is physical gold.
I’ve had a Goldmoney account for over 2 years. I liquidated my holdings worth around US$30K in December 2019, when they instituted the “monthly” storage fee on all accounts. It’s not an “annual” fee, it’s a MONTHLY fee. US$30K x .0018 (0.018%) their max storage fee = US$54/month storage or US$648/yr. The minimum fee is US$10/month.Their storage fees are based on “current value” not weight. I, in turn, bought 1oz gold bars.
Watch out for theft if you store valuables around the house. True story best told in a bar follows. I had a Greek relative I inherited a lot of money from. They were rich, no kids, I was like an adopted son, but they withdrew cash from Greek banks at the height of the crisis, in cash bricks (50 Euro and 500 Euro plastic wrapped notes, wow, never seen those before except in the movies), and long story short, lost a good portion of that money to the domestic help before I showed up. Enough money for the help to retire, and enough money for me to retire as well.
GLD holds physical gold as well. The difference between it and OUNZ is GLD only holds London Good Delivery bars and to redeem GLD shares a basket size of 100,000 is required and it must be done through an Authorized Participant, who of course will charge a fee on top of the ETF redemption fee. That is beyond the reach of almost all retail traders as it would be a nearly $15 million transaction at current prices.
OUNZ is redeemable but the price is steep. There is an Exchange Fee that consists of an application fee plus a per-ounce fee.
For 1-ounce products the application fee is $500. The fee for 1-ounce products ranges from $50 for Australian 1-ounce bars to $100 for Eagles and Buffaloes. That’s $50 to $100 per ounce plus a fixed $500 application fee to obtain physical.
They offer London Bars with an Exchange fee of $5405, a much better deal, but that is not a product within reach of the retail crowd for the most part.
OUNZ is not a practical way to get physical gold for the typical retail buyer as the fees are too high.