JPMorgan's $4B delivery of gold adds to fear tariffs will reshape global trade

Now when you’re talking about strategic trades by central banks, many of those will be for geopolitical reasons. eg Argentina might be worried that in the event of a sovereign default (which goodness knows Argentina have done plenty of times) bondholders may sieze assets, so might want to move the gold to a friendly jurisdiction where the legal system will make this harder for people. Remember that if you’re just moving depositary reciepts (the paperwork GP is talking about) you need someone who owns gold in your target location to swap with. So say you have gold in NYC and you want gold in London, it’s going to be very easy for you to find someone with gold physically in London to swap with or you can just sell your NYC gold and buy some LDN gold. But it’s going to be much much harder to buy gold somewhere where there isn’t a commod forward delivery location (eg Buenos Aires) so it’s much more likely you would have to move gold in that case.

When financial firms take physical delivery [1] it’s usually as an arbitrage because of what the forward curve looks like in that particular commodity, making it viable to do the so called “cash and carry” arb where you buy the physical, sell short the future, take physical delivery, hold it for a while and then deliver. It’s rare and a bit of a surprise tactic and when people do this the difference after carry costs is not usually very large in percentage terms so people do it in big size to make it worthwhile.

And yes it is a bunch of trucks carrying physical gold probably to a vault in the basement of JPM that even most folks at JPM don’t know exists. They won’t be shutting off roads as they don’t want to draw attention before the delivery is complete.

[1] And I used to be a strategist in fixed income, currencies and commodities so I do know people who planned these trades in the past.