London's Record Gold Outflow Sees US Stockpiles Top 4 Years' Demand
Friday, 2/07/2025 17:00
The PRICE of GOLD set a new record high on Friday as data showed stockpiles in London – the precious metal's central trading and storage hub – shrinking by the fastest amount on record as banks, dealers and speculators fly bullion to New York to exploit a price gap with Comex futures contracts.
London gold fixed today above $2875 per Troy ounce at the City's 3pm benchmarking auction, its 6th new daily high of the year so far and marking its 6th weekly gain in a row, adding 10.0% from the last Friday of 2024.
The most active Comex gold contract on US derivatives exchange the CME meantime traded at $2896 for April settlement.
"When accounting for the cost of financing," says analyst Bernard Dahdah at French investment bank and London bullion market-member Natixis, that $20/oz incentive for flying gold out of London to settle on Comex "is no longer that interesting. It is as if the market is no longer pricing tariffs in April."
Typically running closer to just $2, that
NY-Lon gold gap spiked towards $50 ahead of Donald Trump's inauguration as US President last month after the returning Commander-in-Chief had vowed to impose "universal" trade tariffs of 10% on all goods imported into the States. It then rebounded near that level as Washington hit Mexico and Canada with tariffs last week, now temporarily suspended.
Rushing to exploit that 'arb', bullion banks, dealers and speculators pulled 151 tonnes of gold out of London's professional wholesale vaults in January – the heaviest outflow since current records began in summer 2016, just beating the outflows of October 2023 and November 2022.
Gold stockpiles in US warehouses approved for Comex delivery rose another 1.4% by weight on Wednesday, data from the CME says, reaching the most since June 2022 and doubling since Trump's decisive victory in last November's US elections.
Now totalling over 1,000 tonnes against London's total reported stockpile of 8,535 tonnes, Comex warehouses today hold over 4 years of total US jewellery, industrial, coin and small-bar demand.
On top of that, US gold mining produces enough to match 2/3rds of annual US gold demand.
"The outflow of metal from London to New York has tightened the amount of gold available for leasing" here in the UK, says Dahdah at Natixis, raising the cost of borrowing gold sharply.
One-month lease rates were unchanged Friday from yesterday's level of 5.5% per annum, with 2-month gold leases a little cheaper at 5.0%.
Silver leases, in contrast, cost 7.0% for 1 month and 7.5% for 2 months – also sharply elevated from typical levels this decade so far in what one former bullion bank exec' calls
"almost a silver squeeze" – while the spot price of the more industrially-useful precious metal spiked to a new 3-month high at $32.64 per Troy ounce.
Gold stored in London's professional bullion vaults fell by 151 tonnes in January, new data from trade body the London Bullion Market Association showed, a drop of 1.7%.
The steepest drop on current records, starting in summer 2016, that just beat the outflows seen in November 2022 and October 2023.
Two-thirds of January's drop came from the Bank of England, which custodies gold bullion for London's biggest bullion banks, plus the UK Treasury, and mostly for other central banks wanting to hold metal ready for sale or lending in the world's central precious metals market.
"It's an obvious point," said Bank of England deputy governor David Ramsden when asked Thursday about press reports that waiting times for BoE clients to withdraw metal have shot to 8 weeks.
"But gold is a physical asset, so there are real logistical constraints and security constraints...It takes time and the stuff is also quite heavy, as you know."
"Indian gold demand was negligible this week as record high prices deterred buyers," says Reuters, pointing to poor sales by dealers and weak pricing versus global quotes in the precious metal's No.2 consumer market.
Prices in Shanghai meantime ran at a discount to London quotes, also suggesting poor demand in gold's No.1 buyer as
China returns from its big gold-buying festival of Chinese New Year.
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