“There’s a huge disconnect, right now, between the paper market…and the price for physical gold and silver.”— Sr. Precious Metals Advisor Todd Graf
There’s been a whirlwind of negative news lately regarding the state of the economy, driving many people to start investing in precious metals. Just a few weeks after the Fed retired the term “transitory” and admitted that inflation was here to stay, we’re seeing demand for gold, silver, and other precious metals skyrocket.
Smart investors understand the value of precious metals in times of economic uncertainty as a hedge against inflation. However, some people are confused about the current disconnect between the spot prices of precious metals and the physical demand for these assets. Why aren’t spot gold and silver prices going up as the appetite for precious metals grows?
Watch the video to hear what Scottsdale Bullion & Coin Advisors Joe Elkjer and Todd Graf are saying about this disconnect and how investors should respond.
The critical difference between paper gold and physical gold.
Understandably, investors expect spot gold and silver prices to grow as the demand for these physical precious metals increases. In a simple view of supply and demand, this logic seems to make sense. But that’s not currently what investors are experiencing. As physical demand climbs, spot prices seem stagnant. Why?
Currently, there’s a major disconnect between the spot price and physical price of precious metals. Contrary to physical demand, spot price is determined by the paper market which is influenced by traders and gold and silver contracts. Right now, we’re seeing people move towards physical gold instead of paper gold.
People want a tangible asset they can physically hold – something that’s not controlled by an institution or central authority. The paper gold market such as gold ETFs or banks doesn’t offer investors that kind of oversight. It’s a smart defensive move that can offer more protection during this precarious economic bubble.
Gold and silver prices won’t stay this low for long.
The prices of precious metals have remained somewhat unchanged over the past year, but many investor portfolios have outperformed the market. Physical metals have an additional value for which paper markets simply can’t account.
Supply chains are another major obstacle to the accumulation of physical precious metals despite the growing demands. But these lower prices aren’t going to stick around forever.
Now is a great time to start investing in precious metals.
Learn more about the differences between spot prices and physical prices, as well as more about investing in gold and silver with our free precious metals guide.