As with most commodities, an oversupply of anything can cause the gold market to crash. Meanwhile, a lack of supply due to strong demand may increase the price of gold. When demand is low compared to supply, gold sellers may lower their premiums to attract more people who are looking to buy gold bullion bars.
When demand is high, gold traders may increase their premiums not only because of increased appetite from buyers, but also to reduce their sales and protect their own inventory to meet the large demand from buyers instead of sellers.
Everything has its time – even gold
In the regular market, the supply of gold from mining and refining varies between 6 and 8 weeks, due to the high demand for physical gold. When demand is normal, it takes most Australian refineries and dealers up to one week to deliver gold. Gold markets, like silver markets, are generally quieter in the summer months, leading to a tendency for slightly lower premiums. When market activity picks up again, usually at the start of India’s wedding season in September, the increased volatility leads to more buying and selling in the market, which is also likely to increase premiums. What happens regarding gold has a global effect. This is why you want to look at the buying trends of large countries who import more gold than export it. Look at countries like India. For Indians, gold represents wealth and health, it is a good metal to have. Apart from India, it is also loved in China. This is part of Chinese.
Gold premium – impact of global and local economic conditions
Global and local (national) economic conditions affect not only gold prices, but of course premiums as well. The premium effect is not necessarily in the same direction as the gold price effect. There may be a huge demand for gold, which may increase the price of gold. However, gold prices can reach or exceed the level of acceptability in a particular country, leading to difficulties for gold traders in that country. As a result, dealers in that country can lower their insurance premiums.
In high inflation countries like Turkey today, more and more people are relying on gold more than fiat currency savings to maintain their wealth even if the demand for gold worldwide slows dowm.
Financial crises around the world, such as those caused by Lehman Brothers in 2008, dramatically -increased the demand for gold and silver, which was reflected in the increase in insurance premiums.
Gold premiums – influence of the seller’s own goals
A dealer’s individual goals can affect the gold premium. The fear of running out of stock can lead to an increase in the dealer’s gold premium. An excess of gold could also result in a lower gold premium. This is good if you want to buy gold bullion bars.
A dealer who is just entering a new market may offer discounted premiums to attract more buyers. The same can also be true for a dealer wanting to expand the seller wants to increase market share or defeat competitors’ strategies.
