Traditionally, gold and silver banks have been transporting gold from the West to the East to meet the demands of China and India, the two largest gold-consuming countries in the world, accounting for nearly half of global consumption. However, with the current surge in gold prices, global gold banks are now airlifting gold from trading centers oriented towards Asian consumers, such as Dubai and Hong Kong, to the United States.
Amid the latest round of trade wars between the US and China, in recent months, the price of gold futures on the New York Mercantile Exchange has significantly exceeded spot prices, creating profitable arbitrage opportunities.
On Tuesday, February 4th, driven by investors seeking safe-haven assets, gold prices hit a new historical high. Earlier, Beijing imposed tariffs on certain US goods in retaliation for Trump’s new tariffs.
As of 1:40 PM Eastern Time in the US, spot gold rose by 1.1% to $2,844.56 per ounce, having earlier hit a record high of $2,845.14 per ounce during trading hours.
US gold futures closed up by 0.7% to $2,875.80.
According to Reuters, a leading gold and silver supply bank’s trader based in Singapore stated, “Gold prices are skyrocketing while demand in Asia has almost disappeared.” Spot gold prices hit a new all-time high on Monday.
“At the same time, the US is presented with a prime opportunity, naturally, almost every bank is seizing this opportunity by transporting gold to the New York Mercantile Exchange for delivery to profit from arbitrage,” he said.
Since the end of November last year, the gold inventory at the New York Commodities Exchange (COMEX) has surged by nearly 80%, reaching 13.8 million troy ounces, valued at over $38 billion at current prices, with supplies coming from London, Switzerland, and now mainly Asia.
Switzerland shipped 64.2 tons of gold to the US in December, the highest level since March 2022 and 11 times that of November, equivalent to nearly $6 billion in gold bars. However, total Swiss gold exports in December decreased by 4.5% to 123 tons, largely due to a significant drop in exports to China and India.
On Monday, the premium of Comex futures prices over spot prices widened to about $40, with India’s premium reaching $15 and China’s at around $1.
A gold trader in Mumbai stated that the cost of transporting gold from the Asian hub to the US is negligible compared to the current Comex premiums.
He mentioned that a leading gold bank even moved gold stored in tax-free zones in India to the US last week.
Under normal circumstances, many banks import gold into India and store it in tax-free zones, only paying import taxes upon clearance once demand is realized. They can then ship the goods back overseas without incurring taxes.
A gold trader based in Dubai noted that due to high prices suppressing retail demand in Asian markets, gold banks are even sourcing gold from refining facilities in Dubai to meet their demands in the US. Dubai usually serves as a primary supply center for India.
“The US is like a magnet for gold right now, attracting gold from all over the world,” he said.