Gold’s Exodus to the US: More Questions than Answers
It may have been easy to miss if you were just watching the daily news, but those that keep their thumb on the pulse of the gold market, surely know of the mass “migration” of physical gold that moved from London to New York at the start of the year. The mainstream media blamed it all on the threat of Trump’s tariffs pushing the futures price of gold higher in New York, but frankly there are more questions here than this simplistic answer can address. What is clear is that “now” is still the right time to buy gold.
It isn’t anything new that the gold price has been soaring for well over a year (and now we’ve passed the $3,000 mark). But what many did miss is that since January – having begun already at the end of 2024 – massive amounts of gold buckled themselves in on commercial flights and soared their way from London to New York.
According to data from COMEX – short for the Commodity Exchange, a division of the CME Group in New York and the world’s largest futures and options market for metals like gold, silver, and other commodities – more than 30 million troy ounces of gold were transported to New York’s vaults. The last time COMEX saw a spike like this – and one that happened so quickly - was during the start of the covid pandemic.
Why, you ask? The quick answer that many went to immediately: the threat of Trump’s tariff plans on steel and aluminum extending to gold, which pushed the futures price on gold (and silver) higher in New York, creating large price differences with London.
The WGC, World Gold Council, explained the deeper-rooted problem best, if you assume the threat of tariffs is really the root cause of the “gold flight”:
"Short-term speculators and some investors often hold large net-long gold futures positions on the COMEX futures market, while banks and other financial institutions short these futures contracts as counter parties. But these financial institutions are generally not short gold; instead, they run long over-the-counter (OTC) positions to hedge their futures shorts. And because physical gold is more often found in the London OTC market – as a large trading hub and often a cheaper location in which to vault gold – financial institutions typically prefer to hold these hedges in London, knowing that they can quickly – in normal market times – ship gold to the US when there is a need. In recent months, many traders have chosen to pre-empt the threat of tariffs by moving gold to the US, thus avoiding the possibility that they may have to pay higher charges."
Complicating things further was the fact that COMEX depositories work mainly with 1kg gold bars, available in select areas like India, the Middle East, and China. London’s standard bullion is generally stored as 400-ounce (12.5kg) bars. This meant these large bars were pulled from the shelves in London to be converted to 1kg bars in order to make their trip to New York. Gold exports from Switzerland, where the majority of the world’s refineries sit, rose to its highest level in 13 years thanks to the conversions. Our partner, Loomis Switzerland, confirmed as much as they said they were blindsided by the increase of shipments during January.
Gold Inventory in Comex Warehouses Hits Record High
London was certainly not prepared for this surge in outflows: Reuters reported that waiting times to retrieve gold increased from the previously standard few days to four weeks, while the FT quoted an insider source that claimed the waiting period could even extend up to eight weeks. The source went on to say: “People can’t get their hands on gold because so much has been shipped to New York, and the rest is stuck in the queue….Liquidity in the London market has been diminished.”
Things that Make You Go Hmmm???
This swift outflow of metals from London to New York led to a shortage of gold in London and with Swiss refineries, amongst others around the world, being pulled into the fray, one would rightly wonder if there was a shortage of gold in other places.
The answer is no, or not at least that we at BFI Bullion felt here in Switzerland. We continued to buy gold bars directly from our partner, Swiss refinery Argor-Heraeus, and we continued to take deliveries on our clients’ bars normally within a week of our clients’ purchases, as usual.
The next question is: Why is the US suddenly hoarding gold? Could the tariff threat alone really be the sole reason behind the sudden gold exodus early in the year, which, by the way, has continued although not at the breakneck pace as seen earlier?
There is an abundance of alternative theories out there: Does it have to do with the recent increase in calls for a Fort Knox audit? Are there doubts over London’s ability to deliver? Is it aside effect of overall market fears over future uncertainty and investors rushing to prepare for possible disruptions? Or is it perhaps part of a bigger geopolitical and economic shift?
For those that like to think a bit more outside of the box, we invite you to listen to a great podcast where Tucker Carlson interviewed Luke Gromen, a titan in the global research sector, having spent 20-plus years in the field of “helping investors understand the big picture”.
Gromen offered a very different and very compelling explanation for the recent shift. He sees it as part of an overarching narrative and as the next step in the evolution of the US-centric global economic and monetary system. He believes that the new Trump administration has correctly identified the Dollar as a “resource curse” that is now posing a direct, existential threat to the US economy and to the nation’s global geopolitical dominance. Having relied on the currency too heavily and for too long, the nation has allowed its manufacturing capacity to crumble to the point that it has become dangerously dependent on China, while it has also accumulated inconceivably high debt levels - both these developments pose serious risks, even on a national security level.
Gold could be the way in which the new US administration aims to change this course and that could be the underlying reason for the recent gold inflows. He outlined his theory in the interview as follows:
“There has been increasing speculation in the aftermath of Trump’s election and, in particular, in the aftermath of Scott Besson being approved as Treasury Secretary that there is a gimmicky but completely legal and mandated in the rules way by which the United States could revalue its gold, which it currently holds on its books at $42 per ounce up to the current market price, or even higher. And in so doing, it creates a bank deposit, basically, at the Treasury’s bank account at the Fed that the Trump administration could then use to buy down debt, to not have to borrow as much. It’s effectively money printing through gold. It’s creating money supply using gold through basically an accounting gimmick.”
Gold Still Providing Answer to Questions
Of course, it is very hard to pinpoint a single reason that explains this massive exodus. It could be a combination of different forces that triggered the first gold retrievals in late December/January and then human nature could have done the rest - after all, let us not forget how easily fear and panic can spread and how prevalent “lemming” behavior is in the markets.
What we can say for sure is that there is plenty happening right now that will support gold’s ascending spot prices.Even if one “fire” is put out, there are many others that will continue burn. If investors are still wondering if “now” was the right time to buy gold,all things considered, we are still a long way from potential highs, whatever that may end up being. As recently as the start of March, gold industry analysts were predicting gold at $3,000/oz by the end of 2025…look at what has happened already!
This upheaval in the gold market has also, once again, proven just how important it is for investors to own their gold physically and directly, and to store it with reputable and reliable and partners in a safe jurisdiction like Switzerland. Risk diversification in where you hold your metals is more important than ever! Today’s “gold rush” might be because of the tariff threats or due to any other perceived risk, tomorrow it might be because of a recession, a fear which is incidentally currently on the rise. Whatever the next trigger might be, now is certainly the time to prepare for it.
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