(Bloomberg) — The New York gold market has been flipped on its head in just a couple of months, with a scramble for the metal turning into a glut.
Earlier this year, traders who had sold contracts paid a steep premium to close positions after the coronavirus pandemic grounded flights, sparking worries about the ability to get gold to New York.
That drove futures to the highest premium to the spot price in four decades, attracting a flood of metal to the U.S. from around the world. Now, contract holders are trying to avoid taking delivery from the massive inventory.
June futures sank to more than $20 an ounce below August this week, from a premium in mid-April. Notices to deliver on June contracts will begin to be filed Thursday. The June contract is also below spot prices, after fetching a $12 premium as recently as mid-May and $60 in March.
The steep discount echoes some of what oil traders saw earlier this year, when crude stockpiles surged after fuel demand plunged. In that extreme case — which no one expects to be repeated in gold — prices plunged below zero as traders who had bought futures but weren’t able to take delivery were forced to pay buyers to unload the contracts.
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