Gold dealers are selling bullion from the Bank of England at a discount amidst tariff concerns, sparking a rush for the precious metal. The Bank of England’s gold vaults are witnessing an unprecedented situation where gold is being traded below market prices. Typically, gold at the BOE aligns with London market rates, but the current scenario has led to a significant deviation.

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Traders worldwide are hurrying to move gold to the US in anticipation of potential tariffs, driving the demand for bullion. This surge in demand, fueled by fears of trade war implications, has resulted in long queues for gold withdrawals. The Bank of England, which holds a substantial amount of gold, is struggling to meet the escalating demand, creating an unusual situation in the market.

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The surge in gold demand is also reflected in New York’s Comex prices, which have surpassed international benchmarks due to traders closing out short positions to avoid potential tariffs. As a result, gold availability in London remains constrained, leading to a spike in lease rates for bullion. Such market dynamics have led to backwardation in gold prices, a rare occurrence that indicates tight supply and heightened demand.

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Central banks, often relying on the Bank of England for gold storage, are facing delays in accessing their assets due to the overwhelming demand. This situation has prompted some industry experts to question the choice of storing gold at the BOE, suggesting that commercial vaults might offer more efficient services despite higher costs.

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Traders are facing logistical challenges in delivering gold bars from London to New York, necessitating the refinement of bars into smaller units before shipment. The premiums for such transactions have surged, presenting a lucrative opportunity for traders amid the market turmoil.

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Industry analysts emphasize the need for market participants to adapt to the evolving trade landscape, marked by uncertainties surrounding tariffs and trade policies. The London Bullion Market Association acknowledges the concerns raised by the current market dynamics and is actively engaging with stakeholders to address the challenges posed by tariff threats.

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As the gold market grapples with supply constraints and pricing anomalies, stakeholders are closely monitoring developments to navigate the changing trade environment. The potential impact of tariffs on gold prices and market liquidity underscores the need for proactive risk management strategies in the precious metals sector.