Thursday, July 4th 05:57 PM IST

Real Gold of East Vs Paper Gold of West

# Paper gold  # real gold  # western gold  #   

Gold deliveries taking place in the Western markets amount to no more than 10% of the global yearly production, analysts said.

LONDON(BullionStreet): Gold markets in the east and west cannot be compared and the recent drop in gold prices has shown that there is a substantial difference between them.

Analysts said the rift is going to grow in near future. In the west gold was mainly used as a tool for trade and only a small fraction of the gold traded in these markets is physically delivered.

Western markets operated by major commodity exchanges are mainly “paper-based” which implies that only a small fraction of the gold traded in these markets is physically delivered.

Gold deliveries taking place in the Western markets amount to no more than 10% of the global yearly production, analysts said.

Asian gold markets on the other hand are “physical” in nature, because almost all trading operations result in physical delivery of the yellow metal.

Because of this, the gold prices set in London or New York are different from the prices in Mumbai or Hong Kong. Sooner or later, the prices in Asia and the prices set in the Western world will have to converge.

Many analysts believe Asian prices are “real” because of the physical nature of the market, while the mainstream media uses the Western prices as a reference.

The Asian prices are higher because of the need to deliver the physical gold and not some king of promissory note or a certificate confirming gold ownership in an “unallocated gold account” at a “bullion bank”.

The pace of increasing premiums in Asia means physical gold prices are booming while physical gold cannot be delivered quick enough.

Whenever prices fall, Asians tend to buy more gold for its physical value and the yellow metal has become the subject of a fierce battle between two investing cultures and only time will tell which of the two gold prices is real

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