Passa ai contenuti principali

Gold bid/offer spreads blow out to $100 in loco London market

The one thing you could always say about the gold market is ... it is highly efficient. Super-tight bid/offer spreads and even the gold refiners upgrade the stuff for next to nothing. I have seen loco Mali riverside panners getting spot less 2% for unrefined flecks of gold, while wealthy investors pay spot plus 50 bps for the shiny stuff loco London - upgraded and refined to 99.99% purity with all the confidence that a "London Good delivery" refinery gives.

Less so today.

Supply disruptions have seen gold refineries around the world being shuttered, bullion showrooms closed, and even online webshops suspended owing to lack of available metal ; even the ever-reliable interbank bullion market is in something of a pickle today.

The bid/offer spread - the difference between the buying and selling prices quoted in the interbank market - is typically around 0.06%. That is tight ! Today however that spread has blown out to over $100 or 7% - an increase of over 100-fold. Evidently the lack of liquidity in the spot market has meant that market-makers are clearly reluctant to take on a trade. With physical supply much diminished, it follows that taking on a position carries significant inherent risk - especially with physical supply drying up rapidly. In short, trading gold has become expensive - not only is underlying price much elevated, but the cost of getting in and out has risen very considerably. It is a reflection of our times.

Meanwhile many gold refineries are advising they will be closed for about 4 weeks, but with deaths in the West set to peak in about 6 weeks time, we could foresee no return to supply normality for another 6 months or so. 

Meanwhile, in an unprecedented action the LBMA has offered CME, the New York gold futures market, with support with this statement :

"The London gold market continues to be open for business. There has, however, been some impact on liquidity arising from price volatility in Comex 100oz futures contracts. LBMA has offered its support to CME Group to facilitate physical delivery in New York and is working closely with COMEX and other key stakeholders to ensure the efficient running of the global gold market."

We live in unusual times and nowhere is this reflected as much as in todays gold markets - normally seen as providing ballast to the ship in choppy seas - well today the gold market itself is looking uncharacteristically shaken.

Commenti

Posta un commento

Post popolari in questo blog

Fwd: The Looming Bank Collapse The U.S. financial system could be on the cusp of calamity. This time, we might not be able to save it.

After months  of living with the coronavirus pandemic, American citizens are well aware of the toll it has taken on the economy: broken supply chains, record unemployment, failing small businesses. All of these factors are serious and could mire the United States in a deep, prolonged recession. But there's another threat to the economy, too. It lurks on the balance sheets of the big banks, and it could be cataclysmic. Imagine if, in addition to all the uncertainty surrounding the pandemic, you woke up one morning to find that the financial sector had collapsed. You may think that such a crisis is unlikely, with memories of the 2008 crash still so fresh. But banks learned few lessons from that calamity, and new laws intended to keep them from taking on too much risk have failed to do so. As a result, we could be on the precipice of another crash, one different from 2008 less in kind than in degree. This one could be worse. John Lawrence: Inside the 2008 financial crash The financial...
Posta un commento
Continua a leggere

3 Reasons Why Gold Will Outperform Equities And Bonds

3 Reasons Why Gold Will Outperform Equities And Bonds https://www.forbes.com/ 3 Reasons Why Gold Will Outperform Equities And Bonds For centuries, gold has played a major role in human history and has become interwoven into the financial fabric of society. Beyond its investment following, gold has become synonymous with wealth. Historically, gold's early use cases revolved around money – a form of "medium of exchange". After the second world war however, several countries and their respective currencies, started to shift away from the gold standard and migrated towards a fiat currency system. Today, gold remains largely a "Store of Value", and due to its unique properties and large number of use cases, it has managed to distance itself from other asset classes in terms of correlation, demand / supply drivers, and investment purpose. Gold's idiosyncrasies function as a double-edged sword, as it is challenging to predict ...
Posta un commento
Continua a leggere

China Market extends fall on talks of less stimulus

Headline indices of the Mainland  China  equity market closed down for second straight day on Tuesday, 23 April 2019, as profit booking selloff continued after a flurry of comments from policymakers signaled they're less comfortable about adding stimulus. At closing bell, the benchmark Shanghai Composite Index declined 0.51%, or 16.45 points, to 3,198.59 The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 1.32%, or 23.05 points, to 1,728.86. The blue-chip CSI300 index shed 0.16%, or 6.60 points, to 4,019.01.  Top-ranking policymaking bodies including the Politburo, the State Council, the central  bank  and the  Central Financial and Economic Affairs Commission  have all held meetings in the last two weeks.  China  should fine-tune monetary policy in a pre-emptive way based on economic growth and price changes, according to a top-level meeting reports chaired by  President  Xi Jinping.  Monetary po...
Posta un commento
Continua a leggere