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Financial analysts also point out that the broader objectives of Trump’s trade policy, which is about boosting domestic production, expanding job creation, and addressing trade imbalances, do not align with imposing tariffs on gold. The administration’s stance, encapsulated in the "Make America Great Again" agenda and Trump’s recent will to make America a “manufacturing powerhouse”, is focused on protecting and revitalising US industries, which gold, as a non-manufactured asset, does not directly influence.
Ultimately, the evidence suggests that the movement of gold from London to New York is not driven explicitly by fears of tariffs. Instead, it reflects deeper financial incentives, such as arbitrage opportunities between London spot prices and US futures contracts, along with broader market realignments driven by foreign central bank purchases and global economic uncertainty.
Another more plausible explanation for the shortage of bullion in London can be found looking at central banks, especially those from emerging countries, who have been increasing their purchase of gold.
China is the central figure in this phenomenon, leading a global gold accumulation strategy. Many analysts believe its actual purchases far exceed official reports—potentially by a factor of ten—fuelling speculation about its long-term monetary objectives and the impact on gold availability.
Indeed, in 2023 alone, central banks led by China purchased 1,037 metric tons of gold, with the Popular Bank of China (PBoC) buying more gold than all other central banks combined, according to the World Gold Council (WGC). This aggressive accumulation, coupled with the dumping of US treasuries in its reserve, has gained significance in the wake of increasing economic sanctions, highlighting the geopolitical risks of dollar dependency. By amassing gold, China aims to strengthen its monetary reserves while reducing reliance on Western-dominated financial systems.
This trend reflects a broader movement among emerging economies seeking to insulate themselves from Western financial dominance. Beyond China and Russia, countries such as Turkey, India, and several Gulf states have also accelerated their gold purchases, driven by concerns over inflation, currency devaluation, and geopolitical instability.
These acquisitions have further tightened liquidity in London, diminishing the availability of gold reserves traditionally used by financial institutions and traders in the city’s robust OTC market. Unlike in previous periods, when gold could be easily recirculated, much of the bullion leaving London today for the East is being secured by these nations and transferred to storage facilities outside the Western financial network, restricting its availability for trading and exacerbating supply constraints.
This depletion has made it increasingly difficult for traders and financial institutions to access available bullion, disrupting liquidity and reshaping traditional gold market dynamics. Many experts believe that this trend is not merely a reaction to short-term economic instability but rather a strategic realignment of global financial power. Central banks and financial institutions are deliberately shifting their gold holdings away from traditional Western markets and toward politically and economically insulated reserves, reinforcing a long-term trend of de-dollarisation among a part of the countries.
This doesn’t mean that physical gold isn't being stored in the US. The Financial Times recently reported that since the US presidential election in late 2024, approximately 393 metric tonnes of gold have been transferred into COMEX vaults, marking almost a 75% increase in inventory levels, with the biggest 3 COMEX banks (HSCB, JPM, and Bricks) leading the way. However, this phenomenon may be even more significant, as analysts suggest that total stockpiles could be higher when factoring in additional shipments to private vaults owned by major financial institutions.
One the most significant drivers of the gold flow from London to New York has been the growing arbitrage opportunity between the two markets. Reports from the London Bullion Market Association (LBMA) indicate that since the end of 2024, US futures contracts on COMEX have been trading at a premium to London spot gold, a pattern that has repeated historically during periods of supply disruptions and heightened investor demand.
Market participants attribute the premium on COMEX futures partly to logistical constraints and uncertainty. With gold shipments to the US accelerating, some traders tried secured physical holdings pre-emptively. Several industry experts, noted that while the market has been closely watching trade policies, there is still significant uncertainty regarding further tariffs on China and the European Union as well as other regulatory measures, leading to heightened demand for gold futures as a hedge against potential market volatility.
Despite the surge in gold stockpiles within COMEX vaults, the long-term implications of this shift remain uncertain. The LBMA has acknowledged the persistent premium on US futures and stated that it is working with CME Group and US authorities to monitor and address the market imbalance. Indeed, the price premium has fluctuated, at times exceeding $60 per ounce before narrowing to approximately $10 per ounce.
