Bank of Nova Scotia (Scotiabank) told staff on Tuesday it would close its metals business, drawing the curtain on one of the most venerable names in precious metals trading, two sources familiar with the matter told Reuters.

Scotia was for years the world’s biggest lender to the physical precious metals industry, with a history stretching to the founding in 1684 of London gold dealer Mocatta Bullion, which it bought in 1997.

On April 23, 2020, the gold price breached €51,000 euros per Kg for the first time in history. The gold price in euros has increased by 555% since the euro was created in 1999. Put differently, since inception the euro lost 85% of its value against gold.

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Physical gold demand at record levels, paper gold price disconnects

The London Bullion Market issued this statement to Kitco News:

“The London gold market continues to be open for business. There has, however, been some impact on liquidity arising from price volatility in Comex 100-oz ounce futures contracts. LBMA has offered its support to CME Group to facilitate physical delivery in New York and is working closely with Comex and other key stakeholders to ensure the efficient running of the global gold market.”

This surge in demand for physical bullion is across the board and is not just in Singapore, with dealers globally facing the same demand surge for physical. Given the huge increase in demand, there is now a supply squeeze in the precious metals supply chain, with gold refineries, mints and wholesalers running out of stock. These bullion shortages are getting worse every day, and there are long delays on replenishing inventory.

More and more refineries, mints and fellow bullion dealers are suspending their operations indefinitely.

On the demand side, there is very strong and prolonged demand for physical investment precious metals bars and coins. In any properly functioning market, if demand is greater than supply and there is little supply at the current price, then the price goes up or re-rates to a higher level. But this has not been the case with the gold price. Why? Because the price has been subdued and has led to a mis-allocation of supply. Lack of supply leads to an increase in wholesaler premiums, which in turn leads to an increase in retailer premiums to reflect the demand situation. This in turn leads buyers to notice the price disconnect of physical from the price of ‘paper’ precious metal and question the incumbent price discovery mechanism. If only the same was true of financial reporters, who continue to regurgitate ‘margin call’ hearsay.

As a team, Ronald-Peter Stöferle and Mark Valek analyze the state of the global financial markets, monetary dynamics and their influence on gold price developments like no other.

People have treasured gold for millennia. They’ve draped it over the bodies. They’ve used it as money. They’ve even adorned their tombs with the yellow metal. As beloved as it is, it should come as no surprise that gold has been the subject of many famous quotes.