“Bank of England's Gold-Diggers Grapple With Trump-Fueled Frenzy" – Bloomberg, Feb 20, 2025

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Literal gold diggers have been rushing to move some of the $500 billion worth of gold bars stored in the Bank of England's vaults deep below the City of London. 

 

Where is that gold going and why is it being moved? Simply put, that gold can be sold for more in New York. 

 

There's more to it, so let's dig in. 

 

Setting the scene 

Gold is a physical asset which can be used to make components of iPhones and fine jewellery. It is also a financial asset. Viewed by many as a 'safe haven' (it has recently increased to all time highs just below $3000 an ounce), there are many ways to trade gold.   

 

Today, we are talking about futures. Futures are derivative agreements to buy or sell a specific underlying asset such as gold or oil on a set date and price in the future. 

 

Usually, nothing physical exchanges hands. Imagine a portfolio manager trading oil futures - she probably doesn't want truckloads of oil barrels delivered to her Midtown offices. This isn't quite how it would happen, but gives an idea of the logistical nightmare! 

 

What's happening now? 

Driven by speculation of tariffs being imposed on gold imports to the US, the price of gold is currently higher in New York vs. London. At one point this was a huge $50 per ounce premium, which has now narrowed. Note that this is expectations of tariffs, nothing has been announced. 

 

This presents a rare arbitrage opportunity, which only a niche few can take advantage of. Bloomberg reports that some big players have been selling gold futures on the Comex in New York, buying physical gold in London (or they already own it), and then flying those gold bars to Comex's warehouses in New York to physically deliver on the futures contracts they sold. 

 

It's unusual to physically deliver gold on a futures contract! Since the US elections, the amount of gold in Comex's warehouses has more than doubled, a ~$60 billion influx. 

 

There's another hurdle... it usually doesn't go straight to New York, the gold first has to be molten down and reshaped by a refinery, as the standard gold bar weight for the London market is 400-ounces, whilst New York is 100-ounces. 

 

The rush to fulfil these movements is causing bottlenecks at the Bank of England, its reportedly taking several weeks rather than several days to get the gold on trucks. As I found out recently, gold bars are really heavy, and long queues are forming as Bank of England's team work to load trucks as quickly as possible. 

 

It will be fascinating to see how this arbitrage gap closes, what the longer term impacts of bottlenecks will be, and whether or not tariffs are announced on imports of gold. 

 

If you want to dig further, check out how this arbitrage opportunity is also a problem, how the lease rate for gold has spiked and chatter about the USA’s gold reserves at Fort Knox.

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Glossary 

Comex = largest futures and options trading exchange in the world for metals

Bank of England = UK's Central Bank. The Bank of England vaults safeguard approx. $500 billion worth of gold on behalf of nation states and financial institutions 

Futures = Futures are derivative agreements to buy or sell a specific underlying asset on a set date and price in the future 

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