Global coronavirus lockdown measures continue to impact the precious metal sector. Major Asian gold hubs struggle to get their hands on both gold and silver in physical form, with no real improvement in sight.
Physical Bullion is Hard to Come by
It was a matter of time until the supply of physical gold would begin to dry up. Despite noting a decrease in demand for physical precious metals, it is apparent that available supply is running out. All of this can be attributed to countermeasures taken due to the coronavirus crisis.
Several measures have been put in place to ensure the public health is not affected in a negative manner. Globally, all non-essential businesses have been forced to shut down. This also impacts gold and silver mines, which either reduced their output significantly, or halted operations altogether.
Major Asian gold hubs are now starting to feel the pressure. While the demand for gold and silver has decreased, coping with current demand is proving very challenging in its own regard.
Strained supply chains are cutting off certain regions in terms of access to physical precious metals. No gold or silver will be coming out of China, as the country will keep its borders firmly closed for the foreseeable future. As long as that situation remains in place, it seems unlikely that bullion demand in China will increase again.
This is very different from the situation in Hong Kong. That country currently sees a premium for physical gold that can be as high as $1.7. In China, there is a discount of up to $20 per ounce right now. An interesting situation, yet addressing the demand for gold kilo bars in Hong Kong and Singapore becomes a very big problem as time progresses.
Silver Orders Pose Even More Challenges
For those refineries still remaining in operation – in whatever capacity possible – obtaining physical gold isn’t the only problem. Those businesses requiring a steady supply of silver are in an even bigger pickle right now. Orders can be placed with suppliers, but the shipment of physical silver is subject to plenty of hurdles along the road.
One factor making this situation even more problematic is how silver is half as dense compared to gold. Any order placed through reputable dealers is very heavy in weight, which only makes the logistical aspect even more cumbersome. As travel restrictions remain in place in most of the world, that situation will not change either.
Due to the lack of a reliable supply, silver price premiums are as high as $2 per ounce. That is quite a steep amount, as it represents nearly 15% of the current silver price per ounce. All of this seems to hint at an impending silver price increase, albeit it remains to be seen if and when that will be the case.