Understanding the Disconnection Between Dollars and Gold

A lot of paper is selling earlier this week, before testimony presented by Federal Reserve Chairman Jerome Powell. Still, it highlights the level of disconnect between paper and metal pricing right now. He appears to be following the Bank of Japan, which should be great for the metals.

Let’s take a look at the numbers. Gold was flat to down a quarter at $1740 for the week, but silver was down 3% to $25.40, and platinum was down 2% to $1192. Palladium continued its advance from last week, up another 6% to $2672.

One-year numbers look much better, with gold up 7%, silver up 77%, platinum up 67%, and palladium up 36% from a year ago.

Today I wanted to highlight this difference between “spot gold price” and physical prices, as spot price does not accurately account for the tremendous physical demand we see in the marketplace worldwide.

Using American Eagle coins for an example, both Gold American Eagles and Platinum American Eagle coins are running $180-$200 higher than the spot price, depending on how you pay for it. Silver eagles are running $8-10 higher, and all 3 of these options are paying a premium over spot to sell them to the United States Gold Bureau. Bars are less expensive due to manufacturing and demand.

Perhaps someday soon, we will no longer have a “spot” price to report, only a physical price.