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BullionStar

Torgny Persson

Torgny Persson is the founder and CEO of BullionStar. In this blog,
Torgny is sharing what's happening inside BullionStar as well as news
and research from the local and global precious metals markets.

Gold Shortages – Price of Physical Gold Decouples from Paper Gold

  • Date
  • Author Torgny Persson
  • Comments 20 Comments

Update Tuesday, 17 March

The bullion supply squeeze and shortages are getting worse and worse every day. We are working very hard to source metal but regret that we can not replenish most products as they sell out. We will be getting some additional inventory which is already on the way in transit to us by the end of March. Following that, our expectation is that we may not be able to replenish for months. 

Our staff members are working around the clock to try to fulfil all placed orders. Our order volume, call volume and email volume is up exponentially, around ten times to normal.

Effective immediately, we regret that we have to implement a minimum customer buy order of SGD 2,000 or equivalent in other currencies. We have never before had any minimum orders and it doesn’t feel good to have to implement it now as we fully understand that it’s hard for many customers to afford placing orders with such a requirement. However, we are flooded with orders and it would be impossible for us to physically handle the situation if we don’t adopt restrictions. Orders below the minimum amount that were placed before the restriction went into place will of course be honoured. 

Given the current market conditions, we are operating at maximum capacity to fulfil all orders. Our call volume is extremely high and even as we endeavour to answer as many calls as we can, we simply can not answer or return all calls within the day as we have in the past. Instead, please visit our website help section as we have very comprehensive and up-to-date information answering all common questions. Please try to find the answer to your question there. If you still need to contact us, please send us an email to support@bullionstar.com and we will try to reply to your e-mail within 3 business days.

As the spot and futures precious metals markets are failing to reflect the physical supply and demand for precious metals, and as we can not replenish stocks for most products, we have had to increase price premiums. To balance, we are also increasing sell back prices but premiums and spreads are larger than normal.

Kind Regards,
Torgny Persson, CEO BullionStar

Update Sunday, 15 March

Customer buy prices: We have managed to replenish a bit of gold on Saturday but it’s very difficult to find any supply anywhere. We have decided to decrease premiums compared to on Saturday (although premiums are still higher than normal).

Customer sell prices: The sell back prices have been increased, thus spreads have been lowered.

The sell back prices for major silver coins like Silver Maples, Silver Kangaroos, Silver Philharmonics, Silver Britannias, Silver Krugerrands have been increased to spot + 4.

The sell back price for Silver Eagles has been increased to spot + 6%.

The sell back price for Silver Merlions has been increased to spot + 17%.

The sell back price for BSP Silver has been increased to spot +2%

The sell back prices for silver bars of all major sizes such as 1 oz, 10 oz, 500 g, 1 kg, 100 oz, 5 kg, 15 kg have been increased to above the spot price.

Dear BullionStar Customers and Friends,

This is an important update about our company and the current state of the precious metals industry.

Order Records

In the last month, from 14 February 2020 to 14 March 2020, we have seen a record number of orders, record order revenue and a record number of visits to our newly renovated and extended bullion centre at 45 New Bridge Road in Singapore.

For the above-mentioned period, we have served 2,626 customers with a sales revenue of more than SGD 50 M, which is 477% higher compared to the same period last year.

The last few days have been our busiest days of all time. Our staff members have been doing a fantastic job in going out of their way to serve as many customers as possible.

With order volume increasing to this magnitude, it’s difficult for us to timely answer all phone and support requests but we are doing our very best to keep response times down.

Gold & Silver Shortages – Supply Squeeze

The enormous increase in demand is straining our supply chains. BullionStar has supplier relations with most of the major refineries, mints and wholesalers around the world. Most of our suppliers don’t have any stock of precious metals and are not taking orders currently. The U.S. Mint for example announced just this Thursday that American Silver Eagle coins are sold out. The large wholesalers in the U.S. are completely sold out of ALL gold and ALL silver and are not able to replenish.

We are already sold out of several products and will sell out of additional products shortly if this supply squeeze continues. All products listed as “In Stock" on our website are available for immediate delivery. For items listed as “Pre-Sale", the items have been ordered and paid by us with incoming shipments on the way to us.

Paper Gold vs. Physical Gold

As we have repeated frequently over the years, only physical gold is a safe haven.

It’s noteworthy that the paper price of gold, although up 5.7% Year-to-Date denominated in SGD, has been trading downward in the last few days.

Paper gold is traded on the unallocated OTC gold spot market in London and on the COMEX futures market in New York. Both of these markets are derivative markets and neither is connected to the physical gold market.

This means that the physical gold market is a price taker, inheriting the price from the paper market, and that the derivative markets are the exclusive and dominant price makers. The entire market structure of this financialized gold trading is flawed. So while there is unprecedented demand for physical gold, this is not reflected in the gold price as derived by COMEX and the London unallocated spot market.

By now it is  abundantly clear that the physical gold market and paper gold market will disconnect.

If the paper market does not correct this imbalance, widespread physical shortages of precious metals will be prolonged and may lead to the entire monetary system imploding.

And with progressive central banks in Eastern Europe and Asia having stocked up on gold in the last three years, gold will likely be the anchor of the new monetary system arising out of the ashes.

Mainstream media assertions that “Gold has been stripped of its Safe Haven Status" are utterly ridiculous and distorted beyond belief, when in fact the complete opposite is true. Unbacked paper gold and silver may be stripped of safe haven status, but certainly not real physical gold bullion.

Physical Premiums & Spreads

The current supply squeeze and physical bullion shortage has caused and is causing an increase in price premiums. It’s currently difficult and expensive for us to acquire any inventory. We have therefore had to increase premiums on products to compensate for the constraints. We have endeavoured to also raise our prices offered to customers selling to us, but with the extreme volatility and wild price fluctuations, the spread between the buy and sell price may temporarily be larger than normal. It is regrettable that premiums and spreads are larger than normal but it is outside our control that the paper market is not reflecting the demand and supply of the physical market. As many of you know, we are one of the largest critical voices of the LBMA run paper market and its bullion bank members in London.

Please note that premiums are likely to be higher on weekends when the markets are closed compared to weekdays.

We do not take lightly the decision to alter premiums but feel that it is a better alternative than to stop accepting orders altogether during weekends. Likewise it is a better alternative than to stop accepting orders when the paper gold market is in turmoil and failing to reflect the demand and supply realities of the physical bullion market.

Currently, we are completely sold out on BullionStar Gold Bars, BullionStar Silver Bars and are running low on several other products which we are not able to replenish for now. Several stock items will therefore likely go out of stock shortly. This is despite us having been aggressively buying bullion to create a buffer reserve inventory.

Order Placement

Orders for available items will be processed as per normal. All orders are locked in when placed and customers can continue to place orders online 24/7 as well as place orders in our bullion center at 45 New Bridge Road, Singapore. We only accept orders on items in stock or on the way to us. For assurance, we do not accept any ‘forward’ orders for items where we have not secured physical allocation.

We regret that there may be queues at our bullion center in Singapore. We have however recently finished a major renovation and expansion of our shop, showroom and vault. We can therefore serve five customers concurrently. For customers, waiting, the bullion center has been designed as a museum-like experience where you can explore the world of precious metals!

 

We will continue to do our very best to serve everyone and have decided to refrain from implementing any minimum order thresholds for now which we however must keep subject to change if the situation on the paper markets spirals even further out of control.

Hiring

We are continuing to hire qualified staff members in several positions. If you are passionate about precious metals or know someone that is, please get in touch with us! The bullion industry may be one of few industries that will thrive in current conditions.

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