Gold Prices Surge Amid Potential Trump Tariffs: Global Gold Trade

Gold prices are reaching unprecedented highs as concerns over potential tariffs from Donald Trump continue to shake global bullion markets. Since the U.S. election, a massive flow of gold bullion shipments has been redirected from London to New York, significantly tightening supply in the UK.

The London Market Feels the Strain

With the latest 25% tariff threats on Canadian and Mexican imports, traders are scrambling to move gold into the US before new trade barriers take effect. As a result, gold has surged past $2,800 per ounce in the US and £2,262.22 in the UK, setting new records. The situation has caused liquidity concerns in London, where withdrawal times from the Bank of England have skyrocketed from just a few days to nearly two months.

How did we get here, and what does this mean for investors? Let’s break it down.

The Impact of Tariff Concerns on Gold Availability

Why Are Traders Rushing to Move Gold to the US?

Gold is traditionally stored in major financial hubs like London, New York, and Zurich

However, with potential tariffs looming, financial institutions and large traders have been accelerating gold shipments to the US. Their goal? To avoid costly trade barriers that could impact gold imports in the future.

Once in the US, gold can be traded more freely without concerns about import duties, which could make bullion more expensive to move later. This preemptive stockpiling has drained London’s reserves, making it harder for investors to access physical gold in the UK.

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How This Is Affecting Liquidity in London

Liquidity – the ease of buying and selling an asset – has become a growing concern in London. The rush to move gold to New York has significantly reduced available supply, leading to:

• Longer withdrawal times from the Bank of England (now up to eight weeks).
• Higher premiums on physical gold purchases due to scarcity.
• Potential price spikes if demand continues to outpace supply.

This situation mirrors past gold shortages, where low liquidity often led to extreme price swings.

The Gold Market in London vs. New York

Draining London’s Gold Reserves

For years, London has been the centre of the global gold trade. But now, with over $82 billion worth of gold stockpiled in New York, it’s clear that the US is taking over as the dominant physical gold hub.

London’s declining reserves make it increasingly difficult for traders to fulfill large orders, potentially forcing them to seek alternatives, such as Zurich or Shanghai.

Increasing Withdrawal Times from the Bank of England

Traditionally, bullion banks and institutions could withdraw gold from the Bank of England within a few days. However, with demand surging, the process now takes as long as eight weeks, signalling a severe liquidity crunch.

The Growing Stockpile in New York

As gold shipments flood into the US, New York has become the new powerhouse for physical gold. This shift is not only changing market dynamics but also raising questions about whether London will remain a key player in global bullion trading.

Gold Trading at a Premium on COMEX

For the first time in years, gold on the COMEX (Commodity Exchange) is trading at a premium over London prices. Typically, London’s over-the-counter (OTC) market sets the benchmark for gold, but the demand surge in the US has reversed this trend.

This suggests that US buyers are willing to pay more to secure physical gold before tariffs potentially disrupt imports.

Parallels to the COVID-19 Gold Rush

What’s Similar?

The current market resembles the gold rush of 2020, when supply chain fears and economic uncertainty during COVID-19 sent prices soaring.

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What’s Different?

Unlike 2020, today’s rally is politically driven rather than a response to global economic shutdowns. This suggests that gold’s price momentum could continue as long as trade tensions persist.

Read more on the topic here: Is Gold a Good Investment During a Crisis

Investor Strategies in a Tight Market

Should Investors Buy Now or Wait?

With London’s liquidity under pressure, investors considering gold may want to act before conditions tighten further.

Future Predictions for Gold Prices

If supply issues persist, gold could see even higher prices, particularly if geopolitical tensions escalate further.

Gold investments are considered a safe haven asset, with gold prices trending to stay steady and appreciate over time

Central banks have seen to be buying more gold in the last 10 years, with the future market price of gold continuing to rise.

Future prices of gold are unknown however looking at the global economy and major economies such as the United States, you may be able to predict a trend.

Conclusion

Gold’s record-breaking surge is being fuelled by fears of potential tariffs and shifting global trade dynamics. With London struggling to meet demand and gold flowing into the US, market volatility is expected to remain high.

For investors, gold remains a safe-haven asset, but the current liquidity crunch could mean higher prices ahead. If history is any guide, those looking to buy may want to act before supply tightens further.