Gold bars in short supply due to coronavirus disruption

Europe’s largest gold refineries, including those in Switzerland, have struggled to keep up because of the region’s widening shutdown Keystone

Traders have reported a growing global shortage of gold bars, as the coronavirus outbreak both disrupts supply and stokes demand, with one business comparing the frenzied buying of the yellow metal with the consumer rush for toilet roll. 

Retail investors in Europe and the US have bought up gold and silver bars and coins over the past two weeks in an effort to protect their money from the collapse in global stock prices and many currencies. 

But Europe’s largest gold refineries have struggled to keep up because of the region’s widening shutdown. Valcambi, Pamp and Argor-Heraeus are all based in the Swiss region of Ticino, near the border with Italy. Local authorities announced in recent days that production in the area was to be temporarily halted.

The gold price hit a seven-year high on March 9 of more than $1,700 (CHF1,650) a troy ounce as the deepening economic impact of the coronavirus outbreak sent investors scurrying for haven assets. But gold has since been swept up in the selling frenzy, with some investors needing to offload their holdings to free up cash, pushing the price down to about $1,530 on Monday afternoon.

Most of the selling has been in gold futures or exchange traded funds backed by the metal. During the same period, retail demand for physical gold bars has surged.

Retailers have already reported shortages and delays of up to 15 days on shipments. Markus Krall, chief executive of German precious metals retailer Degussa, said it was struggling to meet customer appetite for gold bars and coins and had to turn to the wholesale markets. Demand is running at up to five times the normal daily amount, he said. 

“We are being creative to find new sources but what is driving it all are the measures by authorities to stop coronavirus. This is so unpredictable,” added Krall.

‘Quite extraordinary’

Rob Halliday-Stein, founder and managing director of Birmingham-based BullionbyPost, said the situation was unprecedented. “Basically we’re selling as soon as we get stock on location in secure vaults – but we’re restricted to what we can get hold of. It’s a bit like toilet roll.” 

While London’s gold vaults are full of gold bars, they are of the 400-ounce variety traded by large banks such as HSBC and JPMorgan, not the smaller bars that retail customers buy, which tend to be 1kg (35 ounces) or lighter. 

“I don’t think you will find a kilobar presently in Europe and the US for love nor money,” Ross Norman, a veteran gold trader, said. “It’s quite extraordinary.”

Ken Lewis, chief executive of Apmex, a US precious-metals retailer, said in the past week that the “product has become increasingly difficult to source as the market becomes more volatile day by day”.

The company said it had purchased more than one million ounces of silver grain and bars, more than 20,000 American Gold Eagles coins, thousands of gold bars, and “anything else we can find utilising our many partners and mint relationships”. 

JM Bullion, another US-based precious metals retailer, said customer orders would be delayed by 15 days, and introduced a minimum order size. 

BullionStar, a Singapore-based precious metals retailer, said it was paying a premium to buy back silver and gold coins from customers in an effort to replenish supplies, according to Ronan Manly, one of its analysts. “There’s a disconnect between prices in the physical gold market and the prices you see on your screen,” he said.

Copyright The Financial Times Limited 2020