A notable increase in gold shipments to the United States has caused a shortage of bullion in London, as traders have built an $82 billion stockpile in New York amid concerns over potential tariffs from the Trump administration. The time required to withdraw bullion from the Bank of England’s vaults has lengthened significantly, escalating from a matter of days to a wait of four to eight weeks, as the central bank struggles to meet the heightened demand.
One industry executive remarked, “People can’t access gold due to the large shipments to New York, while the remaining stock is caught in a backlog.” The Bank of England did not provide any comments on the situation.
Since the US elections in November, gold traders and financial entities have transferred 393 metric tonnes into the Comex commodity exchange’s vaults in New York, which has increased inventory levels nearly 75 percent to reach 926 tonnes, the highest since August 2022. Additionally, total gold inflows into the US might be underestimated since there may have been extra shipments to private vaults owned by HSBC and JPMorgan in New York.
Traders believe these shipments aim to sidestep possible tariffs on gold that some fear could be enacted by President Trump. Michael Haigh, head of commodities research at Société Générale, explains, “There’s a sentiment that Trump could impose new tariffs on raw materials, including gold.” This has led to a rush among market participants to safeguard their positions.
The ongoing shipments have also been spurred by higher prices in New York’s futures exchange compared to the cash market in London, creating an attractive arbitrage opportunity for traders to transfer gold across the Atlantic.
While Trump has yet to clarify his trade policies and has not specifically mentioned tariffs on bullion, there is uncertainty surrounding broader tariffs on imports. Gold prices have risen 5 percent since the beginning of the year, nearing their all-time peak of $2,790 per troy ounce reached in October.
London and New York serve as two principal global trading hubs for gold, where most physical trading occurs in London and the futures market is concentrated in New York. Many participants liken the current gold surge in the US to the stockpiling seen during the COVID-19 pandemic when lockdown uncertainties disrupted gold shipments.
The Bank of England provides storage for gold held by various third parties, including financial institutions and central banks, as well as the UK Treasury.
In recent developments, Comex gold inventories have surged by 36 percent this month, with inflows of 244 metric tonnes, marking the highest monthly inflow since May 2020, the height of the pandemic. Traders have indicated they require access to gold for fulfilling certain futures contracts, which entitle buyers to take physical delivery.
Joe Cavatoni, a market strategist at the World Gold Council, stated that the influx of gold into New York is propelling stockpiling behaviors, leading participants to preemptively secure their positions, thus driving futures market premiums.
Nonetheless, Cavatoni expressed cautious optimism regarding the likelihood that upcoming tariffs would affect bullion, noting, “There’s no clear indication from the administration’s rhetoric that it plans to target monetary metals.”
Recently, June contracts for physical gold on Comex traded at a premium of up to $60 per troy ounce over the London market, although this difference has since decreased to $10 per troy ounce as gold has been transferred to New York.
photo credit: www.ft.com
