Loading ...Gold Markets Are Being Haunted by Signs of Discolation Again
parts
Gold prices that usually move in lockstep are diverging again, reviving fears of impending turmoil just a couple of weeks after the last bout of panic.
An ounce of bullion sold in New York was as much as $50 more expensive than in London Tuesday, compared with just a few dollars in normal times. The price spread is seen as a measure of the cost to swap futures contracts into gold in its physical form.
A similar discrepancy occurred about two weeks ago, as the coronavirus crisis disrupted supply chains and caused flight cancellations, leading to worries over a gold-bar shortage in New York just before April futures contracts became deliverable.
The resumption in price divergence shows, however, that investors may be still worried about supply disruptions even though delivery for the current most-active futures contract — June — isn’t due anytime soon.
The cost to swap gold futures to physical products is still high, which suggests that the market remains tight, according to Stephen Innes, chief global markets strategist at AxiCorp Ltd.
Still, traders say there’s too much risk and they’d rather stay away from the market altogether at the moment, which is also exacerbating the price divergence.
“You have a bunch of shell-shocked market makers who are literally hiding under their desks and do not and possibly can not make markets in any size, shape or form,” said David Govett, head of precious metals trading at Marex Spectron. “Hence we have the lack of liquidity, the small volumes and the wide spreads.”
https://finance.yahoo.com/amphtml/news/gold-rallies-spread-balloons-investors-003320697.html