- Impact of US Tariffs: Increasing US tariffs have prompted a global surge in gold demand as investors reassess risk management strategies amid market uncertainty
- COMEX Inventory Surge: By February 2025, COMEX gold inventories rose significantly, reaching levels last seen during the COVID-19 pandemic, driven by preemptive relocations to avoid potential import costs
- Market Dynamics: The divergence between COMEX futures and spot prices, alongside spikes in gold lease rates, reflects traders' attempts to navigate tariff-related uncertainties and logistical challenges
Harare- With increasing US tariffs across the world from America to Europe, Asia to Africa, gold has emerged as a critical barometer of market uncertainty.
As trade tensions escalate, investors and institutions are reassessing risk management strategies, leading to notable shifts in gold trading patterns, inventory movements, and price dynamics.
The threat of tariffs, though not directly targeting gold, has indirectly influenced market behaviour, revealing the interconnectedness of trade policy and financial markets.
In late 2024, COMEX gold inventories began rising sharply as traders anticipated potential disruptions from US tariff policies.
By February 2025, registered inventories had grown by nearly 300 metric tons (9 million ounces), while eligible inventories surged by over 500 metric tons (17 million ounces), according to the World Gold Council, reaching levels last seen during the COVID-19 pandemic.
This influx of gold into the US was unusual, given the nation’s historical self-sufficiency in gold production and consumption.
However, fears of broader tariffs prompted market participants to preemptively relocate gold to American vaults, avoiding future import costs.
The uncertainty fueled a significant divergence between COMEX futures price and spot gold traded in London.
At its peak, the spread between the active COMEX futures contract and spot prices reached US$40–US$50 per ounce (140–180 basis points), far exceeding the two-year average of US$13 per ounce (60 basis points).
This premium reflected traders’ attempts to price in potential tariff-related costs and logistical delays. Similar patterns were observed during the 2020 pandemic, when supply chain bottlenecks and risk aversion drove COMEX inventories higher.
As gold flowed westward, London Bullion Market Association (LBMA) inventories declined, sparking speculation about scarcity.
However, total LBMA holdings remained robust at approximately 8,500 metric tons as of January 2025, with 5,200 metric tons stored at the Bank of England (BoE). Reports of withdrawal delays at the BoE were largely attributed to operational logistics rather than physical shortages.
Meanwhile, gold lease rates, a gauge of market tightness, spiked to 5% in January 2025, signalling temporary strain before easing to 1% by late February as conditions stabilized.
Diverse Supply Sources Ease Market Pressures
The global nature of the gold supply helped mitigate disruptions. Switzerland, Canada, Latin America, and Australia emerged as key suppliers to the US, with Swiss imports often involving the refining of London’s 400-ounce bars into COMEX-compliant 1-kilogram bars.
US mining output, accounting for 5% of global production, further supported inventory replenishment. By early 2025, signs of normalisation appeared as COMEX inventory growth slowed, futures-spot spreads narrowed, and gold ETF bid-ask spreads, many tied to London vaults remained stable.
Beyond tariff concerns, gold’s price resilience in 2024–2025 was underpinned by broader geopolitical and economic risks. Escalating trade disputes, coupled with financial market volatility, drove flight-to-quality flows into gold.
Analysis by the World Gold Council suggests that these dynamics, rather than pure speculation, sustained gold’s upward trajectory despite temporary distortions in trading patterns.
Temporary Disruptions, Lasting Lessons
While the gold market has weathered tariff-induced volatility, the episode reflects the fragility of global trade frameworks. The relocation of inventories, widening spreads, and leasing rate spikes were primarily risk management responses rather than reflections of structural shortages.
As COMEX stockpiles stabilize and BoE withdrawal backlogs clear, markets are likely to normalise.
However, the interplay between trade policy and financial markets remains a critical watchpoint. Gold’s liquidity, diverse supply chains, and role as a safe asset ensure its ability to absorb shocks, even as tariffs reshape the global economic landscape.
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