Gold Is Worth More in New York
bloomberg.com
bloomberg.com
London has paper transactions, but is also a delivery market, where large quantities of real gold change hands. The gold may not actually leave the vaulting system: the transfer can often be accomplished with a warehouse receipt.
However, since November last year, clients of the COMEX (often acting through JPMorgan bullion bank) have been standing for delivery, e.g. 62 tonnes in the 2 weeks after Thanksgiving 2024:
https://www.goldmoney.com/research/massive-comex-deliveries-...
Now JPMorgan is standing for delivery of 93 tonnes in February 2025 (3m troy oz, $4bn):
https://finance.yahoo.com/news/jpmorgan-plans-4-billion-gold...
COMEX has had to scramble to find the physical gold to deliver. The US price went up, creating a spread with London and an arbitrage opportunity. Physical deliveries from the LBMA vaults in London were flown to the COMEX vaulting system in and around New York.
If the deliveries cannot be made in New York, there is a rather murky process called Exchange For Physical (EFP), where the client is given a paper promise for gold delivery in London. Not sure if there is client discretion, or if they can be forced to accept EFP by the COMEX T&Cs.
I think that COMEX does have the right to cash settle delivery requests, but that would be seen as a soft default, and seriously damage its reputation as a physical market grounded in delivery.
New bars get new stamps, serial numbers, etc. It’s a spot where illegal gold can (doesn’t have to) be introduced.
Once you melted London 400oz bars into COMEX 100oz bars, then you fly them to New York.
This process in itself can inflate the COMEX price by the cost of delivery which is folded back into the forward price. When dealing with futures contracts it is important to know that the price is almost always localized based on the cost of delivery. There isn’t one unique global price of gold.
https://www.cmegroup.com/trading/metals/precious/faq-gold-en...
Every wriggle of the weasel needs a good 3-letter acronym. Perhaps they knew what might happen :)
https://www.bullionstar.com/blogs/bullionstar/gold-silver-sh...
It seems the deliveries for Feb are now approaching 200 tonnes:
https://x.com/TFMetals/status/1889708073930919967
P.S. Gold is just under $100k/kg (~= 1 BTC :) So 1 tonne is ~$100m.
https://www.apmex.com/gold-price/1-kg-gold-price
P.P.S. The original JPM delivery of $4bn mentioned above is ~40 tonnes share of the 93 tonnes (3m troy oz).
I was under the impression futures (and derivatives in general) represent an obligation of whomever sold the future contract. Why is the exchange responsible for delivering all of a sudden?
Otherwise you are just betting on paper.
The concern has always been a run on Comex if physical demand suddenly increases. In some ways that would be good, as the paper market is artificially keeping the price of gold down. If you don’t settle in gold you sell more contracts, and the supply is artificially inflated. In short term it will be awful for Comex, which does a very large amount of commodity futures.
I think this says there is 300x as much physical gold as there is gold on paper. Context and common sense indicate the opposite was intended.
You put $100 in a zero-balance account. You spend $10, deposit $20 and then spend another $30. Your ending balance is $80. The total value of transactions is $160. There is a 2:1 ratio of transactions to ending balance.
For technical reasons, when a commodities trader wants to exit or liquidate a position they typically do so by offsetting it. "To offset a position, a trader must take out an opposite and equal transaction to neutralize the trade. For example, a trader who is short two WTI Crude Oil contracts expiring in September will need to buy two WTI Crude Oil contracts expiring on the same date" [1].
If instead of a bank account the first example were gold contracts, the market would show $160 of gross contracts written netting out, in the end, to $80.
[1] https://www.cmegroup.com/education/courses/introduction-to-f...
Yes, paper promise. Sometimes promises can be kept, but not always.
1) China opened up a new gold exchange [0, 1] recently [2] and started a push to get more active in the market.
2) Central banks have been net buyers of gold since around 2007.
3) As part of the Ukraine war effort the US confiscated a bunch of money off Russia. It isn't entirely clear [2] what impact that will have on gold but it is conceivable that the risk of holding US dollars is high enough to make something interesting happen. There is a tipping point here somewhere and the US has been looking for it.
The basic trend in the gold market is it is in flux and there is a definite question of how the BRICS are interacting with it. I'm interpreting the situation as a revolt against US and British influence over the gold market as the productive capital moves to Asia.
[0] https://en.sge.com.cn/eng_about_Overview
[1] https://www.gold.org/gold-market-structure/global-gold-marke...
[2] Gold is a sedate commodity.
> Yawning fiscal deficits, currently nearly 7% of US gross domestic product, are one of the reasons investors flock to bullion to seek safety. That has helped drive gold prices to repeated record highs since last year. Total US federal debt held by the public now stands at nearly $29 trillion.
> “To use ‘a trick’ to try to plug at least the near-term deficit, I think the risk associated with that is far greater than any near-term benefit,” Griffiths said. “It seems desperate and shows an unwillingness to address the source of the problem, which is our outlays and revenues are way out of whack.” [1]
[1] “Wall Street Talk of Revaluing US Gold Is Drawing Attention — and Skepticism” by Jack Ryan, Yvonne Yue Li and Saleha Mohsin, February 13, 2025 (Bloomberg) https://finance.yahoo.com/news/wall-street-talk-revaluing-us...
Bizarre. https://www.youtube.com/watch?v=dYiR0Vh8Gjk explores that a bit.
And a bit of history: https://www.bullionstar.com/blogs/koos-jansen/can-pretend-fo...
This doesn't make sense. If you think gold is the new dollar, this is a story about gold being flown into America. Mostly from Britain, because of historic financial ties, but also from elsewhere.
This article isn't particularly interesting on its own. Someone(s) wealthy thinks their physical gold is better off in the US than the UK. Cool. I wouldn't trust the UK with my gold either but it isn't clear what these wealthy people are thinking. There are some rumours that this is happening because of tariffs. That seems a bit weird; if the gold is happily stored in London then a tariff won't affect it - it'll still be in London. But whatever.
People aren't taking gold out of London because they're scared about it being in the UK. They're taking it out because they can sell it for more in America. There is a price gap between physical gold in America and claims on gold outside it; that's the article's point.
America is a net importer of gold. Our top source of gold is Canada. If we put a 25% tariff on gold tomorrow, its cost would go up. Someone who brought in gold today would be able to sell it for more tomorrow. We know that today, so the price starts rising in anticipation of tariffs.
Put another way, if you can get gold into America on the eve of the tarriffs' rollouts you can capture some of the value of that tariff yourself.
It could be preparation for a tariff. But it might not be.
They might or they might not. I'm not going to defend the market's rationale. I won't even confidently pin tariffs as the reason for the price difference.
What is factually certain is that there is a price difference in the global metals market that is sucking physical gold into America. London has a big, liquid gold market that's tightly tied to New York; herego, we see the ripples there clearest.
This has nothing to do with BRICS or people de-risking from dollars. And it makes no sense for it to be a revolt against American influence over the gold market; the gold is being flown to America and paid for with dollars.
> isn't a reason for Trump to put a tariff on gold
Canada. Would be weird to exempt gold of all things.
I think it indicates Americans are derisking. Buying gold and taking delivery could be a vote of no-confidence in both dollars and paper-gold.
The things happening in the gold market might be related to the largest players in the gold market. It seems too early to rule that out. We don't know exactly what is happening here.
> Canada
I very much doubt that tariffs on Canada are a factor in the UK->US movements; it'd need to be a tariff on gold specifically. If the tariff is on Canadian gold, why would they need to slip English vaulted gold (presumably of all sorts of origins) in before the tariff barrier comes down? It'd be more sensible to wait until the tariffs are a known quantity and fly the gold in on demand.
The market price does that sort of logic on autopilot. If the price differential is enough to have European gold re-vaulted the market has to foresee something bigger than a Canadian tariff. Otherwise the price differential would be just enough to justify moving Canadian gold in early, but not enough to justify flying gold over the Atlantic.
Because of that I'd also clarify/quibble on the 'confiscation' aspect. I expect the larger motivation is freezing russian entities out of SWIFT and dollar denominated banks. That interrupts foreign transactions even more than losing access to reserve capital.
PS: I dont think anyone's moved beyond freezing access to existing russian assets, eg disputing rightful ownership, yet.
They "just" appropriate "profits" from those assets, which effectively means inflationary erasure of purchasing power on the scale of several billions per year, and use assets to back Ukrainian loans with everyone's tacit understanding of future prospects of those loans.
I'm going to twiddle my thumbs for another year or two before even looking up data because the Ukraine war will be obscuring the trends - but that phrase could be describing all of Asia and most of Europe as far as I know. A lot of people trade with Russia. "want insulation from relying on USD for international exchange" could even include US citizens.
> I expect the larger motivation...
Do those aspects affect gold though; it seems like it'd maybe affect the crypto markets and international diplomacy. Scenarios where gold is used for everyday transactions still seem a bit far fetched to me. It seems more likely that people would trade in local currencies. Maybe, I suppose.
Reserve confiscation is something that the central banks have to worry about more directly and they tend to be gold holders.
Use of local currencies is certainly on the rise, but the problem is lack of bilateral financial trust caused by various factors, including capital controls. There is the recent example of Russian companies being unable to get rupee-denominated profits out of India, they had either to buy something from India or invest money there. China is also quite strict with its onshore RNB flows which is multiplied by risks of secondary US sanctions.
Honestly, I am really surprised that BRICS+ countries haven't yet developed a gold-based settlement system centered around central bank reserves. My main guess: such system would work fine with a more or less balanced trade, but many countries intentionally pursue the export-oriented model, which would work poorly with such system.
More than that, like half of the BRICS have threatened to shoot at or actually shot at each other in the last decade [1]. A BRICS currency is like America proposing a currency union with North Korea.
[1] https://en.wikipedia.org/wiki/BRICS Egypt & Ethiopia, UAE & Iran, India & China, et cetera
If you’re trying to do it with millions of dollars equivalent, it’s not great but functions. $100k+? Very common, and remarkably easy compared to other options. During times of great social upheaval and war, it’s often about the only option that works historically.
It doesn’t really help the ultra wealthy as much, unless you’re talking nations during wartime type situations, due to physical logistics and security problems.
And the poor can’t afford anything anyway, so this kind of thing isn’t exactly a problem for them.
Missing out on gains in every macroeconomic environment, QE, ZIRP, NIRP, rate hikes, deflation
to finally get a little rally that rewards their multiple decades of dollar cost averaging
all while apparently central banks have been hoarding it endlessly for twenty years and you’d think that would be the bull case to the stratosphere
but nope. anyway enjoy the all time highs. just needed threat of tariffs all along
People who had 10% of their wealth in gold before 1929 only lost at most 30% of their wealth, something insane like that (losing 30% when nearly everybody loses all their savings is quite a feat).
I don't know if goldbugs and gold permabulls are literally only stockpiling gold coins and gold bars.
Actually I wouldn't be surprised if most gold permabulls only had 10% of their wealth in gold.
And if anything I've noticed when talking to people that most who like gold actually consider the USD and EUR to be toilet paper: it's not so much that they're goldbugs, but they're "anything that's not toilet paper bugs".
So from what I've seen those who bought gold overlap a lot with those who bought digital gold (aka Bitcoin).
I'm not sure who missed on gains here.
One thing we know about low risk investments —- they have low returns.
end.
The most interesting theory is that it's effectively a "bank rank" on "paper gold" issued by London, i.e. traders may fear that there are significantly more claims on gold than physically exists in London vaults. If this market blows up, it would be the most spectacular failure with very significant consequences for global financial markets.
"...when prices on the Comex surged above those in London late last year, baking in possible tariffs..."
It's anticipating tariffs on the import of foreign gold into the United States. (We import a lot of gold, mostly from Canada [1].)
[1] https://oec.world/en/profile/bilateral-product/gold/reporter...
Is this theory back doing the rounds?
And there is the example of Poland which has repatriated all of its gold from UK years prior and stories like this: https://x.com/SenatorRennick/status/1891051795159429514
What does this even mean in the context of trading derivatives of commodities? Of course there isn't, people financed other purchases by borrowing precious metals and selling them, or trading futures on margin with no physical position. Isn't that literally what this market is?
And, like it or not, it's the endpoint for all holdings of non-productive assets. Lease the metal back to traders and make 1%; hold it and pay 1% in storage fees.
this is what happening now, gold price keeps rising
as for the reason behind gold price is higher in NY, there're many theories and we can not know the truth untill it passed
theories:
1. Most paper gold transactions take place in New York, when a short squeeze mentioned occurs, it can cause New York prices to react before London prices
2. some players are draining physical gold from london(world market de facto) by pricing gold higher
Well, there's the rub. They'll just throw their hands up and the claimants are left holding the bag. Which is what sometimes happened historically.
When has this happened historically (I don't know of any examples, but I don't claim that means there aren't any).
It may not be even an outright scam. Those 99 claims may be backed by claims on someone else's gold, but it's likely I will not be able to exercise those claims in a timely manner, making me insolvent. Thus we have a "bank run" situation.
So OP is saying that if more gold was redeemed than expected, the counterparties to those claims would be forced to buy gold at whatever the price it ultimately settles on to fulfill the contract.
Of course the problem is that there is such a thing as counterparty risk. If delivering the contractually obligated gold bankrupts an individual counterparty, or is physically impossible in aggregate (eg more claims than gold exists) then the contract won't be fulfilled at least for someone.
But there is a lot of complexity here because not all futures are settled physically (they can be cash-settled) and there could be mechanisms in place to manage counterparty risk at various levels, like at the exchange, eg https://www.cmegroup.com/education/articles-and-reports/coun...
I wasn't able to read the article because of the paywall but stuff like this is why regular joes tend to think there are bigger problems with gold or finance in general than there actually is. "There is more paper gold than physical gold" - regular Joe thinks there is a problem. "Actually the paper claims' settlement are subject to various conditions, typically closed out before taking delivery, and there is a complex system in place which does its best ensure that anybody who actually wants to take delivery or settle their contract gets it settled as expected" - regular Joe lost interest and went back to doomscrolling.
If you drain and charge the battery at the same time, there is no net change in the charge level. Theoretically, you wouldn't need the battery to begin with.
Now add time lags. Now discharge may happen before charging. The net change is zero over the full duration of the cycle, but the battery is being drained temporarily and it is changing its state all the time.
If the battery is not large enough, the system will shut down. This in itself is not necessarily a catastrophe, but you will have to pay damages over the shutdown duration for the consequences of that shutdown. This will probably ruin profitability of the counterparty.
> "There is more paper gold than physical gold" - regular Joe thinks there is a problem.
Is it a bunch of regular Joe's that are making gold "worth more in New York?"
It’s so easy to spot incentive problems like this and communicate their seriousness to the public.
https://www.voanews.com/a/us-treasury-to-launch-measures-tue...
[1] https://en.m.wikipedia.org/wiki/History_of_the_United_States...
"Musk said in social media posts over the weekend that his “DOGE team” of enforcers is shutting down some payments, claiming that “corruption and waste is being rooted out in real-time.”
If the Musk team veered into legally legitimate transfers, that could spark debate over whether the federal government is following through on its obligations. Former Treasury Secretary Janet Yellen said repeatedly — during debt-limit standoffs — that even prioritizing some payments ahead of others amounted to “default by another name.” Trump’s first Treasury chief, Steven Mnuchin, said in 2017 that “the government should honor all of its obligations."
https://finance.yahoo.com/news/musk-moves-treasury-risk-deba...
You are mis-interpreting this. Based on your interpretation, a government can never cut any spending to not be considered in default.
I think what Yellen meant is that you should pay all your obligations for services rendered and that you actually want to be rendered. This is not what DOGE proposing (and in no way I support that insanity) and the difference is quite clear.
it could be related to his common tactic of creating strategic uncertainty, but this one was oddly specific. most heads of state refrain from commenting on default risk as the 'bond vigilantes' who lend their treasury money by buying their bonds are essential to their ability to fund government and govern.
the risk of course is that there are trillions in derivatives stacked on top of any so-called "illigitimate" debt, which creates a kind of mexican stand-off where defaulting on those bonds causes systemic liquidity problems elsewhere in the system that will require policy intervention to recover from it, hence it is never a priority to touch it. That's a sci-fi interpretation, and any actual practitioner in finance (I am not one) might call that irresponsible speculation so ymmv.
but still, maybe it's a political play. a certain set of asset managers is orchestrating political problems around the world and the only way to dislodge them is to do something unthinkable. Even if he doesn't, how big are you willing to bet he won't? That hesitation is the essence of this president's strategy. Very interesting times.
[1] https://www.reuters.com/markets/rates-bonds/bond-traders-wav...
After it happens, everyone will say it was obvious all along, if only you could have connected the dots.
Dots such as famously bragging about defaulting on personal and business debts, big promises about radical reductions in debt levels with zero public plan for how it's supposed to happen, eagerness to renege on long standing treaty commitments, withdrawal from international organizations, threats of economic warfare against allies and adversaries alike, immediate seizure of the Treasury systems that execute payments for bond interest and principal, a stated desire to dramatically devalue the dollar, etc.
Usually gold just sits in underground vaults and changes in ownership are recorded in a ledger.
When massive quantities of physical gold are put on airplanes, something unusual is happening.
By definition people with low credibility have to fight an uphill battle to get their claims accepted.
My guess is it's not that different. But I've been wrong every time I tried to predict the US on this leadership...
Defaulting on the debt has no upside for them now, so probably won't happen.
The GOP don't have a majority that support either the budget or extending the debt ceiling. Dems should let them stew and make various demands in exchange for their vote, as the GOP has done to them.
Reconciliation is a Senate parliamentary procedure [1]. Thune could just (a) fire parliamentarians until one agrees with Trump or (b) revise the rules with a party-line vote.
[1] https://en.wikipedia.org/wiki/Reconciliation_(United_States_...
Literally the last time these clowns were in power [1].
[1] https://en.wikipedia.org/wiki/2018%E2%80%932019_United_State...
I agree that default is a remote possibility. But the reason isn't Congressional Republicans will avoid shooting themselves in the foot.
Everyone said that about the UK Conservatives until the Liz Truss budget. https://en.wikipedia.org/wiki/September_2022_United_Kingdom_...
Fortunately the UK has extremely efficient systems for removing people who fuck up the money. She was the shortest serving PM and removed on her fiftieth day in office. The US is stuck with its current government until at least the midterms.
Like picking Trump? It seems like the president is the biggest risk of overturning the board for no logical reason
At that time, when those formerly known as rebpulicans are angry about being misrepresented, are you going to tell them that they're not real republicans because they voted for a narcissist who was flattered into turning the wheel over to people with contradictory goals, and now "republican" means something that they have no control over? That's absurd. A party is a party insofar as it represents the will of its constituents, coups not withstanding.
Based on the current MO at the Treasury, it would seem that--possibly to the greatest degree in generations--whether Treasuries keep paying is almost entirely unlinked from what the Congress does.
However, unrestricted fiscal deficits and debt could lead to a reversal of the low positions of the US dollar and gold, shifting from "the US dollar pricing gold" to "gold pricing the US dollar."
When they talked about upending the current order, the banking system and debt in general being sacrosanct are pretty foundational to said order
Governments do not actually borrow from anyone if they can create their own money. They provide a facility for the rich to park some of their immense wealth but that is not where the money comes from, those individuals accumulate they do not create money.
I understand how nation states who print their own currency have a different set of rules than any agent working with currency that they do not control the monetary supply of.
None of that changes the fact that they can _choose_ to default
Nothing has happened YET.
It has not yet happened because of the presence of at least a minimum of responsible players who both understand the consequences and care about the consequences (at least more than their particular political goals).
But there is no structure that prevents it from happening, no part of the machine that prevents a mistake.
There are also forces pushing it to happen.
The past performance of your advice is no guarantee of future performance, and it is particularly bad today.
I sincerely hope you turn out to be right, but if so, it will only be by chance.
https://www.bloomberg.com/news/articles/2025-02-14/gold-pric...
[ To those who post opinion pieces: Is it against the site rules to have the author listed after the actual title? It would help me in this case and others ]
It's not "against the rules" as such, but moderators (at least those in my timezone) will consistently reverse any change in the title like that.
Because that dont actually have to refine the gold for the differing contracts, they just need to exchange it in London
Can we talk about how, before WWII, nearly every village in China had a gold Buddha filled with gems, serving as the local bank?
Can we talk about how the Japanese looted them all and launched a massive sealift operation to stash them in the Philippines?
[...]
Or how at least one of the CIA’s secret ship registries was accidentally exposed in the USAID data dump?
That's enough X for me today.