State Mints Are Experiencing Gold Deficits

Kitco News recently interviewed Edmund Moy, former director of the United States Mint. He talked about the current deficit of gold and silver investment products in many countries and said that it is causing the dealers to increase their markups.

Large dealer markups on investment gold and silver is causing a big gap between the spot market price and the price that retail investors actually have to pay.

According to the expert, the deficit of precious metals is caused by the fact that state mints in the US and elsewhere are struggling to satisfy the demand for investment coins and bars. For instance, the Perth Mint in Australia and the Mexican mint have run out of gold in their warehouses. They can’t store too much of the precious metal at their facilities and often face supply delays.

The markup on investment products often reaches 20%. For instance, an American Eagle gold coin costs $1,775 in the spot market but is offered at $2,000 or more by dealers.

One of the reasons why the spot prices differ so much from the retail prices is that the market is overloaded with gold derivatives. According to the expert, it’s only a matter of time when the paper gold market will not be able to contain the growth of physical gold prices anymore.

Edmund Moy believes that in the next six months, the price of gold should cross the psychologically important $2,000 market price, with $2,100 not deemed as unrealistic.

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