US demand surges as banks move gold from Asia to benefit from premium

Global bullion banks are flying gold into the United States from trading hubs catering to Asian consumers, including Dubai and Hong Kong, to capitalize on the unusually high premium that US gold futures are enjoying over spot prices.

Traditionally, bullion banks transport gold eastward from the West to meet demand from China and India, the world's two largest consumers, accounting for almost half of global consumption.

But alarm about US import tariffs planned by President Donald Trump has driven Comex futures prices substantially above spot prices in recent months, creating a lucrative arbitrage opportunity.

"Gold prices are skyrocketing, and in Asia, demand has pretty much disappeared," said a Singapore-based bullion dealer with a leading bullion supplying bank. Spot gold prices hit a record high on Monday. [GOL/]

"Meanwhile, a sweet opportunity has popped up in the US, and naturally, almost every bank is jumping on it - moving gold over for Comex delivery to cash in on the arbitrage," he said.

COMEX gold inventories have shot up almost 80% since late November, or 13.8 million troy ounces worth more than $38 billion at current prices, with supplies coming from London, Switzerland and now Asia-focused hubs.

The premium on Comex futures over spot prices widened again to about $40 on Monday, compared with discounts as high as $15 in India and a discount of around $1 in China.

The cost of moving gold from Asian hubs to the US is fractional when compared with prevailing Comex premiums, said a Mumbai-based bullion dealer.

A leading bullion bank even moved gold stored in a customs-free zone in India to the US last week, he said.

In normal situations, many banks bring gold into India and keep it in customs-free zones, clearing consignments by paying import taxes only after realizing demand. They can move the cargo back overseas without paying taxes.

As retail demand in Asian markets was muted by high prices, bullion banks were even sourcing gold from refiners in Dubai, which usually serve as a major India-supplying hub, to cater their demand in the U.S, said a Dubai-based bullion dealer.

"The US is like a gold magnet right now, pulling in gold from all over the world," he said.