The Sane Investor

Bullion Shortage and Spot Prices Tell Two Different Gold Stories

What I don't really understand is if there is such a price divorce between the spot price of gold and silver and demand for it in the physical markets, why don't people just buy spot and then sell it in the physical markets? I mean, that's a pretty big arbitrage opportunity.

The only real explanation that I can think of is that everyday people that aren't really hip to other ways precious metals can be traded are going out and buying physical gold and silver. However, as The Prudent Investor (ps I dig the name) indicated, physical reserves in ETCs and ETFs have grown quite immensely, which would lead me to speculate that it's not just gold bugs that are snapping up more precious metals.

I really think that if the dollar loses its forward momentum that we'll see a flight back to gold in the paper markets. Until then, I don't understand how there could be such a difference in the spot market and physical market.