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US banks are scrambling to move billions of dollars worth of gold from London to New York, fueled by fears of a global trade war sparked by President Donald Trump's tariff threats against Europe. This massive influx of gold has more than doubled America's gold inventories since Election Day, with the US now holding around $106 billion in gold, up from $50 billion on November 5.
The gold rush is largely driven by Trump's tariff threats, which have caused gold prices in London to drop by around $20 since December. Traders are also worried that Trump might impose tariffs on gold, prompting a surge in demand for the precious metal in the US.
Major banks like JPMorgan and HSBC are flying gold across the Atlantic to cover losses on short positions, with much of the gold landing in New York City, where it's currently worth more than in London, The Wall Street Journal reported. This development has led to a significant shortage of gold in London, with delivery times increasing from a few days to 4-8 weeks.
Last week, Trump announced 25% import taxes on steel and aluminium, fueling fears that Trump will also impose tariffs on gold.
According to Deputy Governor Sir Dave Ramsden, the Bank of England (BoE) has been inundated with requests due to the significant price difference between London's cash price and New York's futures market prices, the Telegraph reported. Gold futures in New York have risen 11% this year, reaching $2,935 a troy ounce, with some analysts predicting a record-high of $3,000 a troy ounce. As a result, approximately 8,000 gold bars, valued at around 2% of the BoE's total gold reserves, have been moved out of its vaults over the past few months.
Banks are now capitalising on the price disparity by withdrawing substantial amounts of gold from London vaults and Swiss refineries. This gold is then transported to the US, where it's delivered into futures contracts, allowing banks to reap the benefits of higher prices in New York.
JPMorgan is leading the charge, with plans to deliver $4 billion worth of gold this month alone.
How is the gold transported?
To transport the gold, logistics companies are utilising the cargo holds of commercial flights, which is the most cost-effective method. Here's a breakdown of the transportation process:
1. Ground transport: High-strength, secure vans shuttle the gold to the airport.
2. Recasting: The gold is sent to Swiss refiners to recast it into different bar sizes, as required by Comex contracts.
3. Air transport: The recast gold is then loaded onto commercial flights, utilising the cargo holds to transport the valuable commodity to the US.