Gold rush: Why JPMorgan, HSBC are pulling bullion from Bank of England

Donald Trump's tariff threats spark huge gold rush from London to New York as prices surge 11% in the US

Trade disruption between the United States and Europe, caused by US President Donald Trump's tariff threats, has led to a big shift in the gold market. A surge in gold prices in the US, driven by trade uncertainties, has triggered a rush to transport gold from London to New York, creating one of the biggest movements of physical bullion in years.

 

Leading global banks, including JPMorgan Chase and HSBC, are capitalising on the price gap between the two markets, using commercial flights to ferry gold across the Atlantic, the Wall Street Journal reported on Monday.

 

Gold price gap widens amid Trump tariff scare

Gold prices have reached record highs amid concerns over trade policies, with the price of gold futures in New York soaring 11 per cent this year to $2,909 per troy ounce. Analysts predict the price could soon surpass $3,000 per troy ounce for the first time.

 

 

Meanwhile, gold prices in London have lagged behind, trading about $20 lower per ounce since early December.

 

Market participants have attributed this price gap to recent tariff threats by US President Trump, who has criticised Europe’s trade policies and hinted at further duties on the region. Although gold is not directly targeted by these tariffs, the market has reacted sharply, with traders exploiting the discrepancy.

 

Banks withdraw gold from London vaults, Swiss refineries

To take advantage of higher prices in New York, banks are withdrawing large amounts of gold from London vaults and Swiss refineries, transporting it to the US for delivery into futures contracts.

 

JPMorgan alone has planned to deliver $4 billion worth of gold this month.

 

How is the gold being transported?

Moving such valuable cargo requires extensive security. Banks transport gold in high-strength vans to London’s airports before loading it into the cargo holds of commercial flights. Since COMEX contracts require gold bars of a different size than those typically stored in London, some banks first send bullion to Swiss refiners to recast the bars before shipping them to the US.

 

Others bypass this step by exchanging gold in London for bars that meet US specifications or sourcing metal from Australia.

 

Strains on the London gold market

For years, the Bank of England’s "bullion warehouse" has been a trusted storage facility for precious metals, holding assets for central banks worldwide since 1697.

 

The current flood of gold shipments has created bottlenecks in London with the Bank of England struggling to keep up with withdrawal requests. Traders seeking to retrieve gold have, in turn, faced lengthy delays, prompting anxious calls to central bank officials.

 

The last major dislocation in the gold market occurred in 2020, when the Covid-19 pandemic shut down Swiss refineries and grounded flights, disrupting the flow of bullion.

 

India brought home 200 tonnes of gold stored in England

In May and October 2024, the Reserve Bank of India (RBI) shipped back 100 tonnes and 102 tonnes of gold, respectively, to India from the Bank of England’s vaults. This brought the RBI's total gold reserves to 855 tonnes, with 510.5 tonnes stored in India as the central bank reassessed the safety of keeping such a valuable asset abroad amid growing global uncertainties.

 

How will this gold movement impact the Bank of England?

Gold is universally recognised as a store of value. Unlike fiat currencies (paper money), which can be affected by inflation, economic instability, or changes in monetary policy, gold tends to retain its value over time. Banks, particularly central banks, hold gold as a safeguard against financial crises and economic fluctuations.

 

The Bank of England is well-known for its gold storage services and has built a reputation as a secure and stable custodian of precious metals. If significant amounts of gold are withdrawn over time, it could raise concerns about the security of its vaults and its ability to meet growing demand.

 

A large depletion of gold reserves could also cause unease among investors and other central banks, questioning the Bank of England's ability to effectively manage its bullion market.

 

However, London remains a major financial hub, and the Bank of England is likely to adapt by adjusting its services and offerings in response to this shift.