Gold flees London for New York

There is a transatlantic gold rush taking place – the mass outflow of gold from London vaults to New York –this an unusual occurrence, the reason for which is not yet clear. The most common explanations is fear, but open ups space for conspiracy theories. .In recent weeks, the gold market has seen an interesting trend – bullion from vaults in London has been flowing to New York. This phenomenon is particularly noteworthy given London's status as the global centre for trading physical gold and the world's largest exchange for precious metals. Until last month, London and Singapore were the only competitors as centres for pricing and storing world gold.In January, large quantiies of the precious metal were concentrated in London, primarily in the vault of the Bank of England – the second largest after the New York Federal Reserve.
It is worth noting that this situation is between Western Europeans and the USA,Russia and China do not sell or trade gold in London or New York. Since Russians were banned by the LBMA all Russian gold is sold via the Dubai Gold and Commodities Exchange or in Hong Kong or at the Shanghai Gold Exchange. Infact the countries of the BRICS avoid any gold trading with Europe.
Do bear in mind that Russia and China are the world's largest gold miners producing almost one third of the gold mined every year in the World. Both countries also have
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The vault, which is comprised of nine fortified rooms, houses approximately 420,000 bars of gold belonging to the British Treasury, as well as other central and commercial banks. Additionally, there are private vaults managed by global financial corporations.

Traditionally, there is limited information available regarding the movement of gold, as this industry is known for its confidentiality. However, at the beginning of the year, the outflow of gold began to gain momentum, and media outlets began to report on the matter. The vaults are understaffed, unable to cope with the volumes of bars being shipped in and verified, resulting in a multi-week queue for assets to be withdrawn from the Bank of England, as reported by Bloomberg.

Transporting gold itself presents certain challenges. Firstly, space in the cargo hold of a commercial aircraft must be rented, though this is limited since insurance companies do not insure large volumes of valuable cargo. Secondly, the bars must be melted down from the London standard (400 ounces) to the American standard (100 ounces). This is done in Switzerland, whose factories are also unable to cope with the influx of people interested. Only then can the gold be loaded onto a plane from Heathrow to JFK.
Trump spoiled the raspberries
The reason for this excitement, which is not without its market implications, is the threat of new duties from Donald Trump. Investors are forced to queue and move their wealth around the world.
Evgeny Baboshkin, head of business development at the Russian brokerage company PBSR, believes that the only logical explanation for what is happening is the fears of a new trade war between the US and Europe, which sooner or later will lead to Washington imposing import duties on precious metals.
"Dealers are concerned that they could be affected by such duties. If we accept that the initial rates of 25% would hypothetically apply to transatlantic gold, then the consequences for holders would be significant. In this sense, we agree with the new term 'transatlantic gold rush': holders in panic move the precious metal from vaults in London to New York," he says.

The most concerning aspect for precious metal owners is the unpredictability of foreign policy risks, compounded by the potential for sudden and significant duty increases, as evidenced by Trump's abrupt actions. According to Vitaly Manzhos, an expert on the stock market at BCS World of Investments, "Everything can happen quickly and the legislative restriction will no longer be officially bypassable."The recent reports of multi-week queues to access gold from the Bank of England vault further underscore the challenges posed by these dynamics. The claim that this is due to the sluggishness of the precious metals warehouse employees is not without serious question, and such a situation may contribute to the emergence and escalation of conspiracy theories that there may not be enough physical gold for everyone who wants it, further fuelling the frantic demand.
Consequently, gold prices in New York have surpassed those in London, with New York futures trading at a premium to London spot prices, reaching a margin of over $50 per ounce this year. This development follows a similar trend observed in 2020, during the pandemic, when those who successfully arranged for planes to be chartered and gold to be shipped to the US enjoyed significant financial gains.
However, according to Manzhos, the newly emerging opportunity for price arbitrage between continents is not the cause but the consequence of gold's flight to the US. He notes that a similar situation is evident in the case of physical silver, where demand has led to the profitable transportation of even the less expensive metal by plane. The ongoing significant price difference is, however, fueling the current trend.
From the US election to mid-February, stocks on the US Comex exchange grew by more than 20 million ounces, equivalent to approximately $60 billion, primarily due to shipments of metal delivered from London.World central banks have also continued to purchase gold, as countries seek to reduce their dependence on the dollar and protect their currencies from devaluation and inflation. In 2024, central banks purchased over 1,000 tons of gold, a strategy traditionally employed to safeguard the purchasing power of capital.
The current situation is having a significant impact on prices. The price of gold has increased by approximately 25% in US dollars since last year, with the current price of gold now standing at over $1,300 per ounce.
This increase is partly due to a "transatlantic gold rush", which has led to a surge in demand for gold. However, this has also resulted in a negative reaction in terms of price, with gold prices ending the week with a decline for the first time since the beginning of the year. This is due to the fact that the movement requires significant logistics costs, which are shouldered by the senders.
"Technically, they are obliged to sell a small portion of the gold to cover these costs and transfer the rest of their holdings overseas. Any sale of assets – especially one that occurs in haste – invariably results in a decline in the price of that asset," says Baboshkin.
And finally, speculation that the US might revalue its gold reserves is fuelling the excitement. Currently, their value remains at the 1974 level of $42 per ounce. If revalued at today's value, the US would accrue a $800 billion windfall, while gold holders in other countries would face a decline in wealth.
"Technically, they are obliged to sell a small portion of the gold to cover these costs and transfer the rest of their holdings overseas. Any sale of assets – especially one that occurs in haste – invariably results in a decline in the price of that asset," says Baboshkin.
And finally, speculation that the US might revalue its gold reserves is fuelling the excitement. Currently, their value remains at the 1974 level of $42 per ounce. If revalued at current market rates, the US would accrue a wealth of $800 billion, while gold holders in other countries would face a decline in wealth.Adding to the complexity of the situation are concerns about a potential audit of the US gold reserves, which has not been conducted since 1974.
The procedure was widely criticized during that period. If information regarding a potential shortage of gold at Fort Knox were to be made public, it could potentially lead to a significant surge in gold prices and trading volumes worldwide, according to Manzhos.However, this scenario could also give rise to conspiracy theories. For instance, it is possible that authorities are aware of a shortage within American storage facilities and are deliberately withholding information to cover up the true state of the gold reserves. Alternatively, the need to remelt it to the American standard, disregarding the size of the bars, suggests a lack of transparency.The ultimate goal is to ensure the authenticity of the gold, regardless of its ultimate destination.The future of the gold, whether it returns to London or remains in Fort Knox, remains uncertain. However, given the reliability of the information provided by Manzhos, it is unlikely that the Bank of England vaults will be subject to an audit at this time.