How is America's appetite for gold 'sucking up' gold or silver bullion from other countries?!
Strong U.S. demand for gold is sucking up bullion or silver from several countries as traders try to stock up before U.S. President Donald Trump's tariffs on Canada and Mexico kick in. There is a "gold glut" in New York vaults, said Adrian Ash, director of research at BullionVault.
More than 600 tons, or almost 20 million ounces of gold, have been transported to the city's vaults since December last year, according to data provided by the World Gold Council.
This amount of gold does not normally belong in New York, said John Reade, the World Gold Council's market strategist for Asia and Europe. " It is only held when extraordinary circumstances arise," Reade said. The threat of tariffs on gold has prompted U.S. banks, investors and traders to move the precious metal to the Commodity Exchange and other vaults in New York, when it would otherwise normally be stored in London.
“There are concerns that the impending tariffs in Canada and Mexico will impact both gold and silver, ” said Nicky Shiels, head of metals strategy at MKS Pamp. Supply chains have been disrupted due to this sentiment, which has led to the United States importing gold ahead of potential tariffs.
Trump recently said that sweeping U.S. tariffs on imports from Mexico and Canada will continue after a delay in their implementation expires next week. On Feb. 1, the U.S. president signed executive orders imposing 25% tariffs on products from Canada and Mexico. But some said investors fear the threat of tariffs will go beyond the two countries.
There are underlying concerns that broader tariffs will also come into play in the UK and Switzerland, which are also major physical gold hubs, Shiels added. “ The biggest concern is that there could be a blanket tariff on all imports into the US and that this could also apply to gold ,” said Nikos Kavalis, managing director of Metals Focus.
Canada and Mexico are among the largest exporters of gold to the United States. The U.S. imports the most gold from Canada, followed by Switzerland, Colombia, Mexico and South Africa, according to data from OEC World.
Since Trump's election victory last November, U.S. gold futures have largely outperformed their international counterparts, creating arbitrage opportunities for those able to move large quantities of silver bullion into the U.S., according to industry observers.
Concerns about tariffs
Analysts attributed the move largely to traders looking to close out short positions, or to those holding physical gold in New York waiting for short futures contracts to capture the large premium. As of Thursday, gold futures listed on the Comex were trading at $2,930.6 an ounce, while the spot gold price in London was $2,901, a difference of almost $30. The premium was wider in January.
According to data from BullionVault, US warehouses now have four years of US consumer demand and gold reserves. Domestic US gold production in 2024 was estimated at 160 tonnes, down from 170 tonnes in 2023, according to data from the US Geological Survey.
Traders believe Trump "could slap 100% tariffs tomorrow" on U.S. gold imports without hurting U.S. gold prices because there would be enough gold in the vaults. While there is usually no urgent need for physical shipments of gold, investors should be reassured that something can be done that Trump's tariffs threaten to disrupt.
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