Gold Bars Have Become a Scarce Commodity

Due to the coronavirus pandemic, the world's largest precious metals refineries in Italian-speaking Switzerland are closing one after another. As a result, retail gold bars have temporarily become a scarce commodity.

The world's largest precious metals refineries are located in the Swiss canton of Ticino, close to the Italian-Swiss border. As a result of the pandemic, these gold bar manufacturers have been forced to reduce their capacity or close for the next few weeks. This coincides precisely with investors' dramatically increased appetite for gold, producing a gold shortage unlike anything seen before.

The problems are not confined to the New York Stock Exchange — the European and American gold markets have reached a situation that even experienced gold traders cannot recall. Virtually all smaller-denomination investment gold has been bought up by investors moving their money into gold ahead of the economic crisis, causing dealers who still hold stock to raise their premiums significantly. The exchange price has thus fallen well below the actual price of physical gold products.

At present, 400-ounce Good Delivery gold bars can still be purchased in London at close to "normal" premiums, but the price of these bars is around 630,000 euros — approximately 224 million forints — making them entirely unsuitable for meeting the demand of mass retail investors.

Germany's Degussa reported turnover five times its usual level; the American APMEX sold more than 1 million silver coins and 20,000 one-ounce gold eagle coins; JM Bullion, also American, is already quoting a 14-day delivery lead time; and according to Singapore-based Bullionstar's dealer, silver coins are being purchased well above spot prices. In short, real prices are beginning to diverge completely from exchange-based "paper gold" prices.

Across Europe, numerous dealers have closed — partly due to stock shortages, partly out of concern for their employees' safety from infection.

In Hungary too, open gold dealers are now almost impossible to find. In this situation, Goldtresor is sourcing the Good Delivery gold and silver bars that back clients' gold and silver account balances primarily from the London precious metals market.