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Gold Prices: Physical versus Paper

By admin | November 23, 2008

I’m in Mexico this weekend after our trip to Panama and Dominican Republic where we looked at Panamanian offshore banking and tax-free offshore residence opportunities. I was chatting with clients about gold price manipulation during the trip so I promised to check out physical gold bullion prices on arrival in Mexico. In Panama we had found gold coins for sale at a premium way above spot – and I’ve just read that the Perth Mint has completely suspended gold sales in the face of unprecedented demand (and some accusations that they were selling gold they didn’t really have… commentator Robert Nabloid says on the Perth Mint gold link above:

More proof of manipulation on the paper markets…. We can’t even get in line fast enough to buy the stuff and yet it goes down in value when there are so many shortages of the physical stuff… Jason Hommel has been talking about Perth for a while, criticizing them for taking orders for stuff they don’t even have, and taking a long, long time to deliver.

So how would I get on in Mexico, a major producer of gold and silver?

The definitive Mexican gold coin, a safe haven store of wealth for Mexicans who are familiar with devaulations of paper currency, is the Centenario, which is actually slightly heavier than an ounce. To be precise, a Mexican Centenario weighs in at 1.2057 ounces.

According to the current Kitco spot price, therefore, the price of a Centenario is about $912 US dollars. Banamex (a major Mexican bank, 100% owned by Citibank) is quoting a buy price of $878 and a sale price of $951.

Needless to say, when the banks open Monday morning I will head down to see if they actually have these coins available. Let’s hope so. If so I will be putting in a substantial order for a few clients!

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