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Price discovery for physical gold for purchase

Posted by cij on Nov 28th, 2008

Over the past 4 months, spot gold prices had fallen from a high of around the US$950 level to a low of just above US$700. While the spot gold prices had fallen, a curious phenomena happened- physical demand for gold had in fact increased. In Australia, the Perth Mint Gold had to stop taking orders while it is working non-stop 24×7 churning out physical gold for retail purchase. Elsewhere in the world, the same is happening. Reportedly, some individuals are said to be willing to pay say, 10-15% above the spot price for the physical gold.

So far, the demand for physical gold (not for jewellery purposes) has not reach the mainstream society yet. For years, it remains the realm of some rare gold bugs. But interest is growing over the past few years and that explains why companies like Perth Mint Gold are ill-prepared to handle this increase in physical demand.

Consequently, there is a growing disparity between gold spot prices and the price of physical gold for retail buyers. One of our readers, ADEMAC, has found a very interesting resource for discovering the price of physical gold. With that resource, you can keep track of spot gold prices and the price of physical gold (in various forms) at eBay.

But purchasing physical gold involves a little more knowledge because there are many prices for different forms of physical gold. For example, while a 1-ounce gold coin may be around 8% above the spot price, you may find that a 1/4-ounce gold coin may fetch around 33% above the spot price. Why is it so?

To find out more about the resource that ADEMAC had found and why a 1/4-ounce gold coin fetch a much higher price, please turn to our forum discussion here. If you have any questions about purchasing physical gold/silver, you can ask them at our Gold, Silver & Precious Metals forum.

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Back in Marc Faber: Asset Markets May Rebound Within 3 Months, we asked for your votes on what you think will happen to the global equity markets in 3 months time. Some of you have cast your votes. So far, the majority (though a slim one) believes that a whooping big rally will happen. If you haven’t already, please cast your votes here. You will need to register first before voting (the registration process is designed to be very quick for your convenience).