London sees record gold outflow in January in race to ship to US
THE amount of gold stored in London vaults fell by 4.9 million troy ounces in January, the largest monthly decline since records began in 2016, as traders rushed to ship the precious metal to the US to avoid tariff risks and capture premium prices.
London is the world’s largest hub for gold trading, with about US$800 billion worth stored in vaults underneath the capital. Worries that US President Donald Trump will impose tariffs affecting gold sent US prices soaring past those in London last month, offering a lucrative arbitrage opportunity for owners able to fly their holdings across the Atlantic.
The outflows, worth nearly US$14 billion, reduced January stocks by 1.7 per cent from December’s levels, according data collected by the London Bullion Market Association (LBMA), a trade group.
That includes holdings in commercial vaults owned by JPMorgan Chase and Brink’s, among others, as well as gold accounts in the Bank of England’s (BOE’s) vault.
“The monthly decline in gold stocks reflects the well-documented market dynamics at present,” the LBMA said. “Given the flow of metal from London to New York, a 151 tonne decline in stocks in January is unsurprising.”
The one-month lease rate for gold, which reflects the short-term cost of borrowing it, jumped to the highest in decades in January. Long lines to withdraw the metal formed at the BOE’s vault, leading to unusually large discounts for gold stored there compared with the wider market.
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Silver stocks also saw the biggest outflow on record following the emergence of a similar New York premium. That premium hasn’t closed yet, though the spread in gold narrowed significantly last week.
“Like gold, silver’s outflow is directly linked to the movement of metal from London to NY due to tariff concerns,” the LBMA said.
So far, the White House hasn’t given any indication as to whether precious metals will be targeted by any potential tariffs.
The premium between New York and London markets on Wednesday (Feb 5) implied a roughly 20 per cent chance that Trump will include gold in a 10 per cent blanket tariff on all US imports, analysts with Citigroup said.
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