Surging Gold Flows from London to New York Amidst Tariff Concerns
London's central bank is witnessing unprecedented gold outflows to New York, driven by apprehensions over President Donald Trump's threatened tariffs.
Due to tariff fears, gold held in the UK's central bank is trading at a discount. The precious metal has reached record highs of approximately $2,9000 per ounce this month.
Michael Haigh, head of commodities research at Société Générale, suggests that Trump could impose tariffs on raw materials imported into the US, including gold.
The Bank of England, which holds bullion for the UK Treasury and other institutions, has experienced a spike in gold withdrawals. Premiums and discounts on gold typically fluctuate only within a few cents per ounce.
However, Auronom, a London-based bullion dealer, recently reported a $5 per ounce discount on gold held at the Bank of England compared to the New York spot price, with a high of $20 per ounce on Friday, as per The Wall Street Journal.
Delays in bullion withdrawals are also increasing. Louise Street, a senior markets analyst at the World Gold Council, attributes this to extraordinary demand.
The Bank of England houses approximately 400,000 gold bars, making it the second-largest custodian of the metal globally, behind the New York Federal Reserve. While London remains the primary physical gold trading hub, New York dominates futures trading.
Despite concerns, Andrew Bailey, Governor of the Bank of England, maintains that London is the foremost gold market.
Gold prices have hit record highs this month, with analysts from ING predicting further growth towards $3,000 per ounce. The World Gold Council reports a record 4,974 tons of annual gold demand in 2024, driven by central bank purchases and investment growth.
Central banks continue to increase their gold holdings, with over 1,000 tons purchased in each of the last three years. Production concerns may hinder supply, leading to potential price increases.