Hard Assets Alliance IRA

Paper-Physical Divergence

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  • Mon, Mar 30, 2020 - 06:33pm

    #1
    Redneck Engineer

    Redneck Engineer

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    Paper-Physical Divergence

What are your thoughts on the divergence between paper and physical gold and silver?

I was surprised to see the divergence happen. I’m trying to see what will happen in the near future as well as long term.

Will the divergence correct in the near term (say, the next month)? Is it more likely to be paper adjusting to physical, or the reverse? Or is the spread going to be with us for a few months?

Is gold held in vaults considered closer to physical (in one’s own possession) or to paper?

Thanks!

  • Mon, Mar 30, 2020 - 11:47pm

    #2
    jmone

    jmone

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    Joined: Feb 28 2020

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    Paper-Physical Divergence

I think it depends on what the “paper” product is.

I have Perth Mint physical but un-allocated holdings.  As I type, the Perth Mint spread on the prices is based on spot and is 0.77% for gold and is 4% for Silver.  At anytime you can pay a “making charge” (costs varies of the form, eg coins are the most expensive while 400oz good delivery bar are cheapest in % Terms).  You would then have to pay them to store/insure it (1% for Gold, 1.9% for Silver) or arrange to collect or ship.  With the lack of flights, this is an issue they are wrestling with.  Out of interest asked if they have stock (in gold) of 400oz, 50oz bars, and 1oz coins to get an idea of stock levels in general.  All are in stock except the 1oz that sold out yesterday (more next week).

So for me there is no divergence.  This is the benefit of dealing directly with the refiner of 90% of Austrian Gold output.

I have no idea on the other paper products as I’ve never used them  (eg Perth Mint have a ETF for physical gold as well)

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