There Is An Unprecedented Problem In The Gold Market

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As the coronavirus epidemic continues to affect the world, investors have begun to turn to gold in the past 2 days. Gold, which is generally called safe port, runs to the help of investors, especially in such crisis and panic moments.

Investors turned towards gold in this process, but some problems started to occur in gold transactions. Even though the price of gold seems to be hardly affected by the coronavirus, gold transportation has been significantly affected by this outbreak.

Physical Facilities
Since Bitcoin, which is called digital gold, exists entirely in electronic environment, people can easily send Bitcoin from one end of the world to the other. But the same is not the case for gold.

Under normal conditions, banks send their gold coins to other countries by commercial aircraft. Centers such as London, New York and Switzerland, which come to mind when it comes to gold trade, are connected in this way. But there is a problem like this: Many commercial flights and gold refineries were canceled and closed due to the Coronavirus.

No such problems seen
The cancellation / closure of these flights and refineries has hit the gold traffic worldwide. According to the news of Bloomberg, there were serious problems especially in the gold shipments sent from London to New York. Tai Wong, a BMO Capital Markets executive, says the following:

“We haven’t seen such a problem for a generation because the gold refineries never closed. They weren’t closed in wartime, financial crises, even natural disasters. ”

The current problem is that not enough gold is produced or the gold supply in the world is about to end, etc. not. The problem is that the gold held in Switzerland (or Asia) cannot be sent to New York or somewhere else. This seriously affects gold transactions.

For example, in Comex, which is affiliated with CME Group, gold transactions are made in large quantities. But the CME Group has a question mark like this: When the deadlines arrive, will we have enough gold to close these contracts? Under normal circumstances, the answer to this question would probably be ‘yes’. But the answer to this question is a bit more uncertain since there are disruptions in the gold shipments to the USA.

According to the information provided by Bloomberg, this problem in gold transactions led to significant price differences in major trade centers. I think the coronavirus epidemic will need to be taken under control before this problem can be solved completely.


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