RE: Shanghai physical price or paper price???3 Feb 2026 07:20
Shanghai paying premium as its physical and getting close to its New Year ?
The "paper price" for gold (and silver) refers to the highly liquid spot/futures price set mainly on Western exchanges like COMEX (New York) or LBMA (London). This market is dominated by speculative trading, derivatives, ETFs, and futures contracts, where the vast majority (often >98%) are cash-settled or rolled over without physical delivery. Critics in the precious metals community argue this allows price suppression through high leverage and "naked" paper claims not backed by immediate physical metal.The "physical price" reflects actual supply/demand for deliverable metal.
The Shanghai Gold Exchange (SGE) Benchmark Price—shown on the Kitco link you shared—is a key example. It's set twice daily for physical gold traded and delivered in China (the world's largest physical market). It's quoted in CNY per gram, but convertible to USD per troy ounce.
As of early February 2026 data:Western spot price (COMEX/London) hovers around $4,700–$4,900/oz (it recently crashed from record highs but remains elevated YTD).
Latest Shanghai fixes (Feb 1): ~1,160–1,179 CNY/gram, converting to roughly $5,000–$5,200/oz USD (depending on exact CNY/USD rate, ~7.1–7.3).
This shows a Shanghai premium of $200–$400+/oz over Western spot, reflecting strong Asian physical demand (e.g., China/India buying). Premiums fluctuate—sometimes small or negative, but they've been elevated at times due to import dynamics and physical tightness.
On the ratios you mentioned (e.g., "14 paper oz per 1 physical oz" for silver):These come from COMEX data: open interest (total paper contracts) divided by "registered" (deliverable) vault stock.
For silver, ratios often cited at 28:1 historically, spiking to claims of 200–400:1 in stressed periods (most contracts don't demand delivery).
Gold ratios are lower (less extreme leverage), but still paper-heavy.
This fuels the view that paper markets can disconnect from physical reality until a "squeeze" forces convergence.
Which price do you get when selling physical gold?It depends on how, where, and to whom you sell
Retail/small sales (e.g., coins/bars to a local dealer): You typically get the Western spot price minus a spread/discount (often 1–5% below spot). Dealers buy low to resell at spot + premium. You don't automatically capture Shanghai premiums unless the dealer specifically markets to Asian buyers.
Wholesale/large bars (e.g., LBMA good delivery bars): Closer to spot, but "locational" arbitrage matters:Selling "loco London" or Western vaults → gets Western spot (or slight discount).
Selling "loco Shanghai/Zurich" or to Asian refiners/buyers → can capture the premium (e.g., closer to SGP levels).
Physical always has costs (assay, transport, taxes, quotas in China), so pure arbitrage is limited. But in a sustained premium environment like now, sophisticated sellers (e.g., miners, refiners, or vaults with As
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