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Gold Faces Unusual Discount at Bank of England Amidst Market Scramble
Feb 5, 2025

Gold Faces Unusual Discount at Bank of England Amidst Market Scramble

In an unexpected turn of events, gold stored in the Bank of England's vaults is trading at a discount compared to the overall market rates, spurred by heightened fears of potential tariffs imposed by the Trump administration. For more details, please visit the original article.

The stark contrast between prices is raising eyebrows as historically, gold at the BOE aligns closely with market rates in London—where JPMorgan Chase & Co. and HSBC Holdings Plc also hold significant bullion reserves. However, with the ongoing trade tensions, prices at the BOE are reportedly more than $5 an ounce below the London spot price. Such discrepancies have typically been minor, often attributed to central bank activities, but have rarely exceeded a few tens of cents per ounce.

Market analysts suggest that dealers are rushing to move gold to the United States to take advantage of premium pricing before any tariffs take effect. Although precious metals have not been directly targeted by the current U.S. administration, the looming threat of broader tariffs is enough to cause concern among traders. Consequently, this rush has led to extended queues and delays at the Bank of England, making its gold less appealing compared to bullion in quicker-to-access commercial vaults within London.

As per IndexBox data, the BOE houses over 400,000 gold bars, equating to a value upwards of $450 billion at present rates. This represents just a fraction of the more than 8,000 tons of gold stored throughout London. The majority of this gold is owned by exchange-traded funds, central banks, and other investors who might be reluctant to part with their holdings amidst current market conditions.

The global rush for gold has led to a notable increase in New York's Comex prices which exceeded international benchmarks as traders hurried to conclude short positions, anticipating tariff impacts. Nevertheless, the available gold supply in London remains constrained because traders are attempting to acquire metal to fulfill existing commitments. This scarcity is mirrored in the one-month bullion lease rates which have surged to around 4.7%, significantly above the usual rates, signaling a profitable opportunity for central banks to lease their holdings.

Interestingly, forward gold prices for the upcoming month are now trading below current spot rates, a condition known as backwardation, considered rare within the gold market. Although this provides central banks, who primarily store their reserves at the BOE, a chance to earn a higher return through leasing, it also underscores the important role of BOE's reserves during periods of market tightness.

The prevailing practice necessitates refining the standard 400-ounce bars in London into 100-ounce or kilobars in Switzerland before they can be shipped to comply with Comex exchange requirements in New York. This logistical challenge has widened premiums to as much as $50 per ounce, creating compelling trading opportunities.

John Reade, a senior market strategist at the World Gold Council, notes that while the BOE remains a cost-effective storage option, recent delays may prompt some stakeholders to consider relocating their gold to commercial vaults despite the increased costs. "I suppose having their gold at the Bank of England is a decision that some people may be regretting at the moment and maybe that'll cause them to rethink it and keep it with a commercial vault, albeit at a higher expense," Reade remarked.

Source: IndexBox Market Intelligence Platform

  1. 1. INTRODUCTION

    Making Data-Driven Decisions to Grow Your Business

    1. REPORT DESCRIPTION
    2. RESEARCH METHODOLOGY AND AI PLATFORM
    3. DATA-DRIVEN DECISIONS FOR YOUR BUSINESS
    4. GLOSSARY AND SPECIFIC TERMS

  2. 2. EXECUTIVE SUMMARY

    A Quick Overview of Market Performance

    1. KEY FINDINGS
    2. MARKET TRENDS This Chapter is Available Only for the Professional Edition PRO

  3. 3. MARKET OVERVIEW

    Understanding the Current State of The Market and Its Prospects

    1. MARKET SIZE
    2. CONSUMPTION BY COUNTRY
    3. MARKET FORECAST TO 2030

  4. 4. MOST PROMISING PRODUCT

    Finding New Products to Diversify Your Business

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP PRODUCTS TO DIVERSIFY YOUR BUSINESS
    2. BEST-SELLING PRODUCTS
    3. MOST CONSUMED PRODUCT
    4. MOST TRADED PRODUCT
    5. MOST PROFITABLE PRODUCT FOR EXPORT

  5. 5. MOST PROMISING SUPPLYING COUNTRIES

    Choosing the Best Countries to Establish Your Sustainable Supply Chain

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP COUNTRIES TO SOURCE YOUR PRODUCT
    2. TOP PRODUCING COUNTRIES
    3. TOP EXPORTING COUNTRIES
    4. LOW-COST EXPORTING COUNTRIES

  6. 6. MOST PROMISING OVERSEAS MARKETS

    Choosing the Best Countries to Boost Your Exports

    This Chapter is Available Only for the Professional Edition PRO
    1. TOP OVERSEAS MARKETS FOR EXPORTING YOUR PRODUCT
    2. TOP CONSUMING MARKETS
    3. UNSATURATED MARKETS
    4. TOP IMPORTING MARKETS
    5. MOST PROFITABLE MARKETS

  7. 7. GLOBAL PRODUCTION

    The Latest Trends and Insights into The Industry

    1. PRODUCTION VOLUME AND VALUE
    2. PRODUCTION BY COUNTRY

  8. 8. GLOBAL IMPORTS

    The Largest Importers on The Market and How They Succeed

    1. IMPORTS FROM 2012–2024
    2. IMPORTS BY COUNTRY
    3. IMPORT PRICES BY COUNTRY

  9. 9. GLOBAL EXPORTS

    The Largest Exporters on The Market and How They Succeed

    1. EXPORTS FROM 2012–2024
    2. EXPORTS BY COUNTRY
    3. EXPORT PRICES BY COUNTRY

  10. 10. PROFILES OF MAJOR PRODUCERS

    The Largest Producers on The Market and Their Profiles

    This Chapter is Available Only for the Professional Edition PRO

  11. 11. COUNTRY PROFILES

    The Largest Markets And Their Profiles

    This Chapter is Available Only for the Professional Edition PRO
    • United States
    • China
    • Japan
    • Germany
    • United Kingdom
    • France
    • Brazil
    • Italy
    • Russian Federation
    • India
    • Canada
    • Australia
    • Republic of Korea
    • Spain
    • Mexico
    • Indonesia
    • Netherlands
    • Turkey
    • Saudi Arabia
    • Switzerland
    • Sweden
    • Nigeria
    • Poland
    • Belgium
    • Argentina
    • Norway
    • Austria
    • Thailand
    • United Arab Emirates
    • Colombia
    • Denmark
    • South Africa
    • Malaysia
    • Israel
    • Singapore
    • Egypt
    • Philippines
    • Finland
    • Chile
    • Ireland
    • Pakistan
    • Greece
    • Portugal
    • Kazakhstan
    • Algeria
    • Czech Republic
    • Qatar
    • Peru
    • Romania
    • Vietnam

  12. LIST OF TABLES

    1. Key Findings In 2024
    2. Market Volume, In Physical Terms, 2012–2024
    3. Market Value, 2012–2024
    4. Per Capita Consumption, By Country, 2018–2024
    5. Production, In Physical Terms, By Country, 2012–2024
    6. Imports, In Physical Terms, By Country, 2012–2024
    7. Imports, In Value Terms, By Country, 2012–2024
    8. Import Prices, By Country Of Destination, 2012–2024
    9. Exports, In Physical Terms, By Country, 2012–2024
    10. Exports, In Value Terms, By Country, 2012–2024
    11. Export Prices, By Country Of Origin, 2012–2024

  13. LIST OF FIGURES

    1. Market Volume, In Physical Terms, 2012–2024
    2. Market Value, 2012–2024
    3. Consumption, By Country, 2024
    4. Market Volume Forecast to 2030
    5. Market Value Forecast to 2030
    6. Products: Market Size And Growth, By Type
    7. Products: Average Per Capita Consumption, By Type
    8. Products: Exports And Growth, By Type
    9. Products: Export Prices And Growth, By Type
    10. Production Volume And Growth
    11. Exports And Growth
    12. Export Prices And Growth
    13. Market Size And Growth
    14. Per Capita Consumption
    15. Imports And Growth
    16. Import Prices
    17. Production, In Physical Terms, 2012–2024
    18. Production, In Value Terms, 2012–2024
    19. Production, By Country, 2024
    20. Production, In Physical Terms, By Country, 2012–2024
    21. Imports, In Physical Terms, 2012–2024
    22. Imports, In Value Terms, 2012–2024
    23. Imports, In Physical Terms, By Country, 2024
    24. Imports, In Physical Terms, By Country, 2012–2024
    25. Imports, In Value Terms, By Country, 2012–2024
    26. Import Prices, By Country, 2012–2024
    27. Exports, In Physical Terms, 2012–2024
    28. Exports, In Value Terms, 2012–2024
    29. Exports, In Physical Terms, By Country, 2024
    30. Exports, In Physical Terms, By Country, 2012–2024
    31. Exports, In Value Terms, By Country, 2012–2024
    32. Export Prices, 2012–2024

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