US Banks Shift Billions in Gold from London to New York Amid Trade War Fears

In a significant development in global finance, major US banks are rapidly shifting billions of dollars’ worth of gold from London to New York. This mass movement of gold has been triggered by concerns over potential tariffs and the widening price gap between London’s cash price and New York’s futures market.

According to a news report, the US gold reserves have more than doubled since Election Day, with holdings rising from $50 billion in November to approximately $106 billion.

What’s Driving the Gold Exodus?

The movement of gold is being largely driven by the tariff threats posed by former US President Donald Trump. His decision to impose 25% import duties on steel and aluminium has led to speculation that similar tariffs could be applied to gold. 

As a result, gold prices in London have dropped by around $20 since December, leading traders to shift their holdings to the US, where demand has surged.

Additionally, the discrepancy in gold prices between the two financial hubs has incentivised banks to capitalise on the arbitrage opportunity. New York gold futures have increased by 11% this year, reaching $2,935 per ounce, with analysts forecasting a potential record-high of $3,000 per ounce.

The Role of Major Banks in the Gold Migration

Large financial institutions such as JPMorgan and HSBC have been at the forefront of this gold migration, reportedly flying substantial amounts of gold across the Atlantic to cover losses on short positions. The impact has been profound, with the Bank of England (BoE) witnessing a sharp rise in withdrawal requests. 

According to Deputy Governor Sir Dave Ramsden, approximately 8,000 gold bars—equivalent to 2% of the BoE’s total gold reserves—have been moved from its vaults in recent months.

A Supply Crunch in London

With the exodus of gold to the US, London is experiencing a notable shortage. While gold deliveries in London typically take just a few days, the heightened demand and withdrawal pressure have extended delivery times to between four and eight weeks. This has created logistical challenges for traders and banks still reliant on London as a global gold trading hub.

How Is the Gold Transported?

The logistics of transporting such vast quantities of gold involve a highly secure and methodical process. The movement is typically executed in the following steps:

1. Ground Transport: Gold is transported from vaults in London to airports using high-security armoured vehicles.
2. Recasting in Switzerland: Before reaching the US, the gold often makes a stop in Switzerland, where refiners melt and reshape the bars into sizes that comply with Comex contract requirements.
3. Air Transport: The refined gold is then flown to New York, primarily using the cargo holds of commercial flights, which is considered the most cost-effective method.

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