The global gold trade heavily relies on the world’s financial centers which store gold and provide derivatives trading. Although most speculators do not take delivery of futures contracts, this option exists for those requiring physical possession of gold.
London has historically been the world’s primary gold trading hub; its market share may be declining but remains crucial for global gold markets.
Professional investment managers are highly attuned to shifts in political dynamics. While attention was focused on how Trump’s tariffs might affect consumer goods prices, these managers recognized that a potential trade war between the U.S. and UK could have a profound impact on gold prices.
Consequently, 4.9 million troy ounces of gold were raked out of vaults in London in January, which was the largest outflow since 2016 when London started to track the data. At that time, such records were needed to evaluate the impact of Brexit.
The tariff-related panic was so intense that the Bank of England had to comment on the issue, attributing the massive gold outflow to the tariff threat. Investors willing to evacuate their gold holdings out of London must be patient — there are no available slots for the coming weeks.
Let’s take a look at the current situation in terms of its impact on the price of gold. The world’s largest gold trading hub has suddenly become «toxic». If you buy gold in London, you may face tariffs if you need physical delivery of gold. At a time of rising geopolitical tensions, an increasing number of investors want to have access to their physical gold at short notice, so this is an important factor in decision-making.
Meanwhile, demand for gold continues to grow. Central banks, including the People’s Bank of China, are keeping buying gold to diversify their reserves. Professional managers and retail investors have also started to increase their gold holdings to benefit from the strong trend, which was triggered by central bank purchases.
Demand for gold stored in financial centers that are less exposed to tariff threats will continue to increase. It should be noted that global investors have been evaluating whether London is safe enough to store physical gold due to geopolitical risks, so the tariff threat adds an important negative catalyst to an existing trend.
A rising number of professionals, including those at Bitbanker, prefer to offer gold that is stored in the UAE to their clients to minimize risks. The current trends are creating a shortage of gold in the market, as the metal stored in London is not in high demand. This shortage continues to push the price of gold towards new highs.