Raw materials in this article
Facts that previously belonged to the “superfluous knowledge” category: Around 70 percent of the gold mined worldwide is processed in Switzerland. Three refineries of the companies Valcambi, Argor-Heraeus and PAMP process around 1,500 tons of gold together around a third of the worldwide annual supply, plus considerable quantities of other precious metals. All three plants are in the Canton of Ticino – and nothing has been going there since Monday.
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In a phase in which gold is in demand as a safe haven, the supply of coins and smaller bars breaks down. In addition, there are bottlenecks at the stamp shops and in logistics. If you absolutely want to stock up on physical gold, you should do this quickly, but then you have to accept unfavorable conditions such as significantly increased premiums. Physically secured gold ETCs are a sensible alternative. The table below gives an overview of the current situation at ten precious metal dealers as of Thursday, 5 p.m.
The local authorities in Ticino want to maintain the closure of non-vital industries for at least a week in order to slow down the spread of the Sars CoV-2 virus. From the locations of the gold refineries in the south of the canton, it is hardly more than 50 kilometers to Milan and around 100 kilometers to Bergamo, which is one of the worst affected by the corona pandemic. There are many commuters from one country to another. Even if the step of company closures in Switzerland is legally controversial at the federal level: At least Valcambi and Argor-Heraeus announced that they would close down by the end of the month.
The situation is constantly changing
At the same time, many mints close: South Africa and Canada close at least as long as the refineries. “The Perth Mint in Australia is no longer accepting orders because they have to replenish two million silver ounces due to open orders,” says Christian Brenner, managing director of the precious metals dealer Philoro. Its branches, like all dealers, are long closed. Investors can only buy in online shops. Philoro still has goods and can also send them. “There are currently no colorful bouquets of products, but we still have large stocks and can also service all orders at short notice,” says Brenner.
But the situation changes from day to day. Because Prosegur, the value transporter, had only given up delivery to private individuals and is now offering it again with restrictions, it has become more difficult to ship consignments with a value of over EUR 25,000. Other logistics service providers such as FedEx no longer deliver to certain countries. Due to the border closings, shipments no longer come from the USA and Canada, with other sources it is questionable how long there are places for air freight, for example.
The precious metal traders must therefore find new solutions. Heraeus Gold no longer ships, but storage in the high-security warehouse is free until the end of the year, both for new and existing customers. Degussa also offered this in the meantime, but is now shipping again. The Munich Pro Aurum even had to close the online shop for three days last week in order to process the large number of orders received. As a consequence, to cope with the huge demand, the company now limits itself to accepting 500 orders per day. “We prefer to forego new business rather than customers having to wait extremely long for delivery,” says Robert Hartmann, founder and partner of Pro Aurum.
Tsunami of purchase orders
Because buyers are streaming online shops and telephone hotlines like never before. Gold traders speak of a tsunami of inquiries, Pro Aurum, for example, has a demand that is 50 to 60 percent higher than the time of the financial crisis. “Everything that is offered is bought, it is no longer a question of price, but of availability and quantity,” observes Henry Schwarz, Managing Director of Anlagegold24.de. “Goods that come in today are sold almost immediately.” He sees parallels to the Lehman bankruptcy and the stock market crash of 2007/2008. “The difference is that the financial crisis did not affect everyone. The corona virus, on the other hand, is everywhere, almost everyone in front of the door,” said Schwarz.
The delivery times – some of them several weeks long – are worrying customers, and thousands are making inquiries by phone to find out where their gold is. Many investors also don’t like the storage option, they want to hold the precious metal in their hands. However, the security aspect is worth considering: some of the bank branches are currently closed, so bank sleepers are not always accessible – if you get one at all. However, it is not recommended to keep the gold at home, especially if there is no safe. Finally, criminals should also know how big the run on bars and coins is right now.
When it comes to replenishment, traders’ statements fluctuate between extremes. “We keep getting products in, but the market is swept clean,” says Daniel Klee, member of the executive board at ESG Edelmetall-Service, for example. “We have contracts for the coming weeks, but the situation can change at any time. In between, we also had the situation that everything was gone in the online shop.” And while Pro Aurum in Germany, according to information from Thursday, has stocks for two to four weeks, it says in the Swiss online shop: “We are sold out and will no longer receive any new goods in the foreseeable future.”
Gold price on the rise
After the gold price initially suffered from emergency sales by investors, the precious metal is now on the upswing again. In view of the open cash gates at the Fed and ECB and the multi-billion dollar aid packages from various countries, the gold price should benefit in the medium term. Gold eased again in the 2008 financial crisis, but turned upward with the announcement of the Fed’s quantitative easing. By 2011, it had risen to around $ 1,800 per troy ounce. However, due to the expected slump in demand in the gold nation of India, Commerzbank analysts “do not believe that the trees for the gold price will grow skyward”. Investors who are not willing to pay the steeply increased surcharge for physical gold or who have not received enough money from traders are better off investing in an ETC such as XetraGold (ISIN: DE 000 A0S 9GB 0). This product is also backed with gold bars and can be bought and sold at any time.
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Image sources: Pics-xl / Shutterstock.com, Netfalls – Remy Musser / Shutterstock.com, Finanz Verlag
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