With stocks having been hammered in recent weeks, demand for gold has skyrocketed among investors looking to protect their investments. In fact, demand has increased so much that supplies of physical gold coins at most dealers have all but dried up. Try looking for gold coins online and you’ll be hard pressed to find any in stock. And if you do find some, odds are that you’ll find them at very steep markups.
That’s the difference between paper gold and physical gold. While those who invest in paper gold, such as shares in exchange-traded funds (ETFs) or other derivatives of gold, only see increases in their holdings with regard to spot prices, those dealing in actual physical coins and bars often see gains far above gains in the spot price.
Silver is much the same way, with prices for physical silver coins often reaching premiums as high as 100%. More and more investors want to get their hands on physical gold and silver coins, not trusting their wealth and assets to a financial system that looks on increasingly shaky ground. With financial markets in need of trillions of dollars in bailouts from the Federal Reserve, it’s now obvious that we’re due for a redux of 2008, although this time around may be far worse. And investors who may have been complacent about the risks to their investments before, now realize that we’re in for a rough year and are seeking to get their hands on gold coins at all costs.
The difference between gold futures prices and the gold spot price has similarly diverged, with futures prices rising far above the spot price. That indicates that future gold prices will likely be far higher than current spot prices, particularly if demand for gold coins doesn’t abate, or if supplies of coins and bars remain tight. Gold investors who have been waiting for gold to re-test its all-time highs may very well see that happen in the next year or two, as falling stock markets and financial weakness make a very bullish case for investing in gold.