Why are we seeing SPOT and Physical spreads widen?

[STKR]

Yup, exactly what I first stated - price gouging of the laymen retail punter.

If that were the case, simply raising the premium would be the answer for all, Not removing listings for Bullion on their website.

Physical Gold is also more available than silver for purchase. This is evident in the listings made available from dealers - many not listing silver at all.

I have also shown you how to procure uninflated physical.

You've shown how to buy paper Gold with a convertibility option. I'd say that isn't the same thing in this environment and not everyone is comfortable with that option, nor does it offer the same level of protection or opportunity when supply is restricted. This thread topic is a good example.

 

[alor]

they have 20 bullion worth of gold to sell, but better to close shop, if the price move up 1% each day your shop remains closed
4 weeks then continue another 4 weeeeksss

 

[wrcmad]

You've shown how to buy paper Gold with a convertibility option. I'd say that isn't the same thing in this environment and not everyone is comfortable with that option, nor does it offer the same level of protection or opportunity when supply is restricted. This thread topic is a good example.

The whole original premise of this thread was based on convertibility of futures to physical being risk-free, and the widened margin being attributed to cost of carry via increased demand of storage costs, as posted by the OP. So, in this thread at least, I'm not sure you can take the position of "we are uncomfortable with that evidence" based on the convertibility of paper.
The news is out that this cost-of carry spike was corrected after day 1, and was due to fake news of a physical supply squeeze.
The line of argument that retail premiums have risen is not being disputed, but has been pointed out by more than just myself that it is the naïve retail customer is the one paying these premiums, not the smart money.
The subject of the LBMA not delivering has quietly been dropped.
There are many hopeful and dreamy stories being released on the inter-webs at the moment that lead to the gold bug holy grail of the world running out of PM's. Unfortunately for us, they just ain't true.
Maybe we need to decide which story-line we should run with for the sake of this debate, because it is getting a little confusing.

 

[STKR]

The current premium is due to price gouging of the ignorant retail client by bullion dealers...

This is what the "debate" is about - the premium being due to price gouging - rather than a bottle-neck in supply caused by unprecedented demand.

As I have mentioned previously, a simultaneous increase of premiums makes absolutely no sense from a business stand-point, without the existence of supply disruptions. We aren't just seeing higher premiums, we're seeing listings being removed entirely. This is where your "price gouging" theory runs out of steam.

I don't doubt that there is physical gold out there, nor do I doubt there is physical silver.
But gold and silver are becoming increasingly more difficult to take delivery of in physical form and this, in my view, has everything to do with a supply bottle-neck causing a trickle down effect from the refineries to the dealers. Hence why Perth mint and ABC Bullion still have some listings while other lower tiered dealers have little to none.

The thread title is "Why are we seeing Spot and Physical spreads widen". I completely disagree that it is due to price gouging and the logical explainations for you holding this position are lacking.
Buying unallocated or paper silver which has a convertibility option still won't result in the physical asset being acquired any sooner than buying Gold or Silver on backorder. You're also still going to be paying a minting fee equivalent to the premium/spread from spot to physical.
Using ABC as an example, you pay a small premium over spot for allocated metal. If you want to take delivery, you pay an equivalent fee relative the the premium/spread of whatever bar or coin you desire. If you wanted to take delivery, you would still need to go to the back of the pre-order queue and wait the same amount of time as if you purchased on backorder in the first place.

Because of the initial low premium you pay to buy allocated or unallocated, you would actually be worse off if you decided to take delivery of the product. The only time it's advantageous is if you held your allocated/unallocated storage until the premiums returned back to normal, and even then it wouldn't be much of a difference.

 

[wrcmad]

As I have mentioned previously, a simultaneous increase of premiums makes absolutely no sense from a business stand-point, without the existence of supply disruptions. We aren't just seeing higher premiums, we're seeing listings being removed entirely. This is where your "price gouging" theory runs out of steam.

I don't doubt that there is physical gold out there, nor do I doubt there is physical silver.
But gold and silver are becoming increasingly more difficult to take delivery of in physical form and this, in my view, has everything to do with a supply bottle-neck causing a trickle down effect from the refineries to the dealers. Hence why Perth mint and ABC Bullion still have some listings while other lower tiered dealers have little to none.

The thread title is "Why are we seeing Spot and Physical spreads widen". I completely disagree that it is due to price gouging and the logical explainations for you holding this position are lacking.
Buying unallocated or paper silver which has a convertibility option still won't result in the physical asset being acquired any sooner than buying Gold or Silver on backorder. You're also still going to be paying a minting fee equivalent to the premium/spread from spot to physical.
Using ABC as an example, you pay a small premium over spot for allocated metal. If you want to take delivery, you pay an equivalent fee relative the the premium/spread of whatever bar or coin you desire. If you wanted to take delivery, you would still need to go to the back of the pre-order queue and wait the same amount of time as if you purchased on backorder in the first place.

Because of the initial low premium you pay to buy allocated or unallocated, you would actually be worse off if you decided to take delivery of the product. The only time it's advantageous is if you held your allocated/unallocated storage until the premiums returned back to normal, and even then it wouldn't be much of a difference.

I disagree, a simultaneous increase of premiums makes perfect business sense under the current circumstances - panic buying and resultant temporary low dealer stocks = profiteering on lower volumes over the counter. It isn't only bullion dealers doing it. It has happened numerous times before. It will happen again in the future. And a lot of other retail sectors are doing it too. It's not rocket science.

Buying backed unallocated deliverable in 2 days will get you the metal much sooner than back-order, unless the bullion dealers back-order system has improved remarkably since I last back-ordered.... or there is more metal around than assumed?

Of course you pay a minting premium - every bullion product has a fabrication premium built into the price, but there is no way it is equivalent to current over-the-counter premiums - not sure where this assumption came from?

As listed by PM, the fabrication premiums on conversion amount to <$20/oz for gold, and <$2/oz for silver, for all bars. So I am guessing your statement above was not well researched.

BTW, the gold cost of carry has again decreased another per cent to 3.5% over the 24hrs this thread has been to-and-froing, which again reinforces the lack of physical squeeze, and supports the fake news theory.

And I'm guessing the LBMA non-delivery didn't eventuate?

 

[STKR]

I disagree, a simultaneous increase of premiums makes perfect business sense under the current circumstances - panic buying and resultant temporary low dealer stocks = profiteering on lower volumes over the counter. It isn't only bullion dealers doing it. It has happened numerous times before. It will happen again in the future. And a lot of other retail sectors are doing it too. It's not rocket science.

I think it's more to do with a knock-on effect of refineries and distributors increasing their premiums and resulting in a larger premium from the Bullion dealers on a % basis, rather than the dealers price gouging and profiteering. I think it's more to do with the free market determining the price based on current level of demand vs ability to supply.
If the replacement value of the Bullion is higher than it was previously on a % basis over spot, then Bullion dealers are given no choice but to pass that expense on to the customers.
Additionally, in a pre-order market there would be an increase in time ($) to process orders from start to finish, as opposed to selling items already in stock. Costs would absolutely be passed on down the chain.

I don't deny there would be an element of profiteering but there's no way the increase in premiums would be mostly due to price gouging, like you suggest.
If there were decent profits to be made then ANY business would be mad to remove inventory from their websites and/or not compete within a highly competitive market.

Buying backed unallocated deliverable in 2 days will get you the metal much sooner than back-order, unless the bullion dealers back-order system has improved remarkably since I last back-ordered.... or there is more metal around than assumed?

How do you come to that conclusions? Companies stating they have no gold unless you want to convert your unallocated storage to physical? Why would you get priority for physical delivery over order's for physical being made before you or at the same time as you?

Of course you pay a minting premium - every bullion product has a fabrication premium built into the price, but there is no way it is equivalent to current over-the-counter premiums - not sure where this assumption came from

ABC Bullion do this for their allocated storage:
"The barring fee of any product can be calculated as the difference between the selling price of that bar and the equivalent selling price of ABC Pool Allocated Product. So the barring fee is roughly the same as the amount you saved initially with choosing ABC Pool Allocated Product, as ABC Pool Allocated Product takes the cost of making the specific bar out of the price."

This is from Perth mint:
"Fabrication costs are payable at the time of conversion and are based on precious metal market prices at the time of the conversion."

As listed by PM, the fabrication premiums on conversion amount to <$20/oz for gold, and <$2/oz for silver, for all bars. So I am guessing your statement above was not well researched.

.... Can you please provide a link.

 

[wrcmad]

I think it's more to do with a knock-on effect of refineries and distributors increasing their premiums and resulting in a larger premium from the Bullion dealers on a % basis, rather than the dealers price gouging and profiteering. I think it's more to do with the free market determining the price based on current level of demand vs ability to supply.
If the replacement value of the Bullion is higher than it was previously on a % basis over spot, then Bullion dealers are given no choice but to pass that expense on to the customers.
Additionally, in a pre-order market there would be an increase in time ($) to process orders from start to finish, as opposed to selling items already in stock. Costs would absolutely be passed on down the chain.

I don't deny there would be an element of profiteering but there's no way the increase in premiums would be mostly due to price gouging, like you suggest.
If there were decent profits to be made then ANY business would be mad to remove inventory from their websites and/or not compete within a highly competitive market.

OK. Your opinion is a fair one. The free market does determine price - and as I mentioned before, I consider dealers taking advantage of the current panic and using this free market anomaly to gouge retail buyers. Gouging = profiteering.
One point you keep coming back to is dealers removing inventory from sale? I stated previously this would not make business sense, so I don't believe it is happening.
We should agree to disagree on this going forward, because this one is now flogging a dead horse.[/QUOTE]

How do you come to that conclusions? Companies stating they have no gold unless you want to convert your unallocated storage to physical? Why would you get priority for physical delivery over order's for physical being made before you or at the same time as you?

Perth Mint is not "other companies". Their allocated is physically backed by their working inventory, and Govt guaranteed. Basically they use their pool investors to free up cash-flow locked up in their blank stock and inventory. This has previously been confirmed from the inside by Bron, and can be found in writing here.
So, being fully backed by physical, of course you get priority for delivery - it is your physical and you have paid for it already. Thus they can supply physical in 2 days.

.... Can you please provide a link.

Sure. Here.

 

[STKR]

One point you keep coming back to is dealers removing inventory from sale? I stated previously this would not make business sense, so I don't believe it is happening.

How can you not believe it's happening?Almost all dealers are pre-order for gold and have limited stock available to pre-order. It's much worse with silver. ABC Bullion only offer their 10oz and Kilo bars for pre-order.
Delivery AFTER 29/05.

Eagles, maples, Kooks, koalas, Krugerrands, kangaroos, ABC Eureka, 500g bars, 100oz bar, 5kg bars are all removed from their website. Including all Pamp and high premium coins.


That link to Perth mint states:

1. FABRICATION
Clients with Unallocated or Pool Allocated metal must convert their holding to physical bars or coins prior to
collection or delivery. The standard time frame for fabricating metal is 10 business days, however, this may
change with demand (this does not include delivery time).

Perth Mint is not "other companies". Their allocated is physically backed by their working inventory, and Govt guaranteed. Basically they use their pool investors to free up cash-flow locked up in their blank stock and inventory.

You said unallocated. 2 day delivery is for allocated bars that are pre-minted and stored. Hence why I asked why you would get priority.

Buying backed unallocated deliverable in 2 days will get you the metal much sooner than back-order

Agree on the 'flogging a dead horse' comment.

 

[wrcmad]

That link to Perth mint states:

1. FABRICATION
Clients with Unallocated or Pool Allocated metal must convert their holding to physical bars or coins prior to
collection or delivery. The standard time frame for fabricating metal is 10 business days, however, this may
change with demand (this does not include delivery time).
You said unallocated. 2 day delivery is for allocated bars that are pre-minted and stored. Hence why I asked why you would get priority.

Your right.
Got me.
This 10 day time-frame only applies if you want a specific coin or size that they haven't got in stock, otherwise:

Allocated deliverable in 2 days. - Here
Doesn't need fabricating, as it was purchased as an allocated physical lot and is already sitting in the vault as backing.
Same purchase price, only difference being cost of carry slightly more.

If that was my only hiccup, I can live with that.

 

[STKR]

If that was my only hiccup, I can live with that.

One point you keep coming back to is dealers removing inventory from sale? I stated previously this would not make business sense, so I don't believe it is happening.

No, you just have a tendency to deflect and ignore points that poke holes in your theories.

 

[wrcmad]

One point you keep coming back to is dealers removing inventory from sale? I stated previously this would not make business sense, so I don't believe it is happening.

No, you just have a tendency to deflect and ignore points that poke holes in your theories.

I will reiterate - I never claimed dealers were pulling inventory. It was you who raised this point. I don't know why you are still persisting with this? I am confused?
It's a mere theory of yours.... so there is no hole poking to be had.
I backed every claim I made with evidence, and stated when it was merely a belief which we could disagree on.
You did not supply one shred of evidence for your theories, so I feel I remain holeless, and you remain pokeless.

 

[STKR]

No, you just have a tendency to deflect and ignore points that poke holes in your theories.

Your price gouging theory makes no sense when dealers are pulling the majority of their stock. Clearly there are other reasons for the increase of premiums than the profiteering angle you're coming from.

You're welcome to search Bullion dealers in Australia and around the globe to confirm this. Most dealer offerings are a fraction of what they were a month ago. "It's not Rocket science".

 

[sgbuyer]

I found an interesting "non-pumper" video on gold shortages. I'm not technical enough to understand the full messsage. Maybe you guys can take a look.

EDIT: I just noticed the first video had been posted! Check the latest video.

 

[raven]

Your price gouging theory makes no sense when dealers are pulling the majority of their stock. Clearly there are other reasons for the increase of premiums than the profiteering angle you're coming from.

You're welcome to search Bullion dealers in Australia and around the globe to confirm this. Most dealer offerings are a fraction of what they were a month ago. "It's not Rocket science".

Just emphasizes how the paper price is a fraud, in many an opinion .... maybe, however !

 

[66rounds]

I found an interesting "non-pumper" video on gold shortages. I'm not technical enough to understand the full messsage. Maybe you guys can take a look.

Belangp is a long time stacker and really knows his stuff. He is also a proponent of playing the gold to silver ratio.

 

[66rounds]

From not being able to deliver 100oz bars to now suddenly not having 400oz bars for delivery. The rabbit hole gets deeper and deeper and it looks like an empty bullion bank vault at the end.

 

[wrcmad]

From not being able to deliver 100oz bars to now suddenly not having 400oz bars for delivery.

Wow, that sentence is the single best contextual misrepresentation of the truth I have seen on the forum since Ronnie666 used to embarrass himself here. Kudos to that.
But in a few weeks all this permabull hope will be forgotten, and it will be back to whining about the silver price (yes, spot) and the GSR (ooooh, the ratio of 2 spot's).

 

[66rounds]

Wow, that sentence is the single best contextual misrepresentation of the truth I have seen on the forum since Ronnie666 used to embarrass himself here. Kudos to that.
But in a few weeks all this permabull hope will be forgotten, and it will be back to whining about the silver price (yes, spot) and the GSR (ooooh, the ratio of 2 spot's).

Have to admit I didn't even bother watching the video. Please do share some of Ronnie666's escapades, haven't been around long enough to know him

 

[sgbuyer]

Belangp is a long time stacker and really knows his stuff. He is also a proponent of playing the gold to silver ratio.

Have you seen this video? It's dated Dec 31, 2013. Gold price was $1200 and silver around $20 at that time. Over the next 2 years, both fell.

 

[66rounds]

Have you seen this video? It's dated Dec 31, 2013. Gold price was $1200 and silver around $20 at that time. Over the next 2 years, both fell.

Interesting, if we work out what caused that drop we can look for it this time around