The premiums that buyers put on physical forms of gold and silver indicate the level of interest for the most conservative forms of gold and silver. High or rising premiums indicate strong buying; declining premiums show declining demand; low premiums can indicate low interest but not necessarily. Sometimes demand can be strong but supplies are sufficient to meet demand.
Mineweb.com reports that concerns about Euro zone debt have pushed gold bar premiums to two-year highs in Hong Kong, where gold bars are offered at a premium of $3 to the spot London prices. $3 premiums on gold bars in Hong Kong were last seen in late 2008 at the height of the global financial crisis.
Concerns about Portugal seem to be the driver behind Hong Kong buying; and, with gold off its historical high of $1,430 in December, many investors see gold as cheap at the $1,375 level. Later this week, Portugal will go the bond market to raise funds. If unsuccessful, Portugal will be the third PIIGS nation to turn to the EU and IMF for financial aid.
Of interest, is China’s entry into the Euro debt market, a development worth watching. China’s buying of Euro debt, especially PIIGS debt, could more political than for investment purposes.
Greece and Ireland were the first and the second PIIGS to require bailout money. Spain is adamant that it will not need a bailout, but credit rating agencies think otherwise. Concerns about Italy are muted at the moment.
Adding to bar demand in Hong Kong is strong demand from China where refineries have been closed for the holidays. Still, concerns about Portugal are on the forefront. Even if Portugal finds buyers for its debt, the rate it has to pay will be indicative of the marketplace’s concerns about Portugal.
Presently in the US, premiums are normal, which means that such items as Gold Eagles and gold bars can be bought at premiums that reflect normal markups by wholesalers and by retailers. Presently, Krugerrands can be bought about $15-$17 cheaper than Gold Eagles. At times, Rands are as much as $20 cheaper than Gold Eagles.