There are other factors that can also impact the price offered for physical gold which results in a premium or a discount to the global spot market.

We can call this ‘market premiums’.

Factors that drive market premiums

Market premiums are not as stable and predictable as normal premiums and are driven by factors such as:

  • The current market supply and demand situation
  • Global and local economic conditions

Market premiums driven by high demand

From time to time, there may be shortage of physical bullion in markets. This may be due to eg the higher than expected demand, driven by buyers during times of uncertainty; or by temporary import restriction imposed by a government

It can also be a result of supply constraints eg

  • Flight restrictions
    This shortage is also being affected by flight restrictions. For example, there may be enough bullion in Tokyo but the reduction in flights means that the bullion stock is unable to be flown out of Tokyo to our suppliers, delaying shipment.
  • Closure of operations
    Gold refineries produce less refined gold because their supply chain of unrefined gold dore is lockjammed or because the refineries themselves are unable to operate at full capacity