What Caused The New York Vs. London Gold Price Spread And Why It Persists – NATION AND STATE

https://nationandstate.com/2020/05/02/what-caused-the-new-york-vs-london-gold-price-spread-and-why-it-persists/

Generally, just the threat of delivery keeps markets in line as well. Any trader that sees an arbitrage opportunity can take position without the intention of making/taking delivery, in the knowledge that New York futures and London spot will converge. Now this certainty doesn’t prevail, traders are cautious. If they take positions but the spread widens, they lose.

Another reason why the spread can persist, is because of strong demand in New York. Speculators that reckon the price of gold will go up will buy long futures, increasing the spread. Normally, this type of demand is smoothly translated into the spot market by arbitragers without increasing the spread. But not now.

In a nutshell, I think that logistics and credit restrictions prevent the spread to close. However, if anyone has a better analysis please comment below.

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