London's bullion market is experiencing a rush to borrow gold from central banks, which store the precious metal in London. The surge in gold deliveries to the U.S., driven by speculation of potential import tariffs, has led to a minimum waiting time of four weeks to withdraw gold from the Bank of England. Normally, this process only takes a few days to a week.
Although U.S. President Donald Trump has not explicitly included precious metals in his tariff plans, the perceived risk has prompted increased gold shipments to New York. This uptick is partly due to hedging positions on the U.S. COMEX exchange and partly due to exploiting the price premium of COMEX futures over London spot prices.
London serves as the world's largest over-the-counter gold trading hub, facilitating direct transactions between market participants. The decrease in the Loco London free float – the gold readily available in London – is a consequence of the heightened deliveries to New York.
Despite concerns about the redistribution of gold, London remains a crucial gold market. BoE Governor Andrew Bailey highlighted the significance of having gold in London for trading purposes, notwithstanding the diminishing free-float metal in London vaults due to U.S. deliveries.
Liquidity challenges in other major trading hubs have emerged as a result of these developments, with logistical hurdles hindering the movement of large gold quantities globally. Alexander Zumpfe, a precious metals trader at Heraeus Metals, pointed out that the ramifications are being felt worldwide, including in Asian markets like Singapore and Hong Kong.