Amid concerns over potential tariffs initiated by President Donald Trump, gold dealers are offering Bank of England (BOE) bullion at discounted prices, signaling a significant deviation from the standard market rates. The BOE, known for its substantial gold reserves valued at over $450 billion, is witnessing unprecedented queues for gold withdrawals as traders rush to secure the precious metal before the imposition of tariffs. This rush has led to gold prices at the BOE trading at more than $5 below the London spot prices, a deviation rarely observed in the market.

Typically, gold prices at the BOE align closely with the broader London market; however, the current situation has created a unique scenario where the BOE gold is being traded at a discount due to the fear of potential tariffs. As traders seek to move gold to the US and capitalize on premium prices, the BOE’s operational capacity is strained, resulting in delays that diminish the attractiveness of storing gold in its vaults compared to commercial vaults in London.

Traders are resorting to loading planes bound for the US with gold and silver as part of their tariff strategy. The surge in gold prices on New York’s Comex exchange reflects the market’s anxiety over potential tariffs, leading to a scarcity of freely available gold in London. This scarcity is evidenced by the significant increase in one-month lease rates for bullion, which have spiked to around 4.7%, well above the usual levels.

Furthermore, the unusual backwardation in gold prices, where forward prices are lower than spot rates, highlights the current market tightness. Central banks, often relying on the BOE for liquidity in such situations, are now facing challenges due to the surge in demand for gold borrowing. The logistical complexities of delivering gold bars from London to New York have led traders to refine bars into smaller denominations before transporting them, with premiums soaring as high as $50 per ounce.

Industry experts emphasize the strain on the BOE’s operational efficiency, suggesting that traders may reconsider storing their gold in commercial vaults despite the higher costs involved. The London Bullion Market Association acknowledges the market dynamics driven by US tariffs and is closely monitoring the situation to provide clarity on the evolving requirements. The current scenario underscores the intricate interplay between geopolitical factors, market speculation, and logistical challenges in the global gold trade landscape.