Substantial outflows from the Bank of England’s gold vaults have prompted questions about whether the bank is running out of its precious reserves. However, the governor of the Bank assures that there is no shortage of gold.
However, he acknowledges that billions of pounds of bullion have been moved and flown across the Atlantic recently. These movements are part of a broader financial maneuver. Traders are anxious about the possibility of the U.S. imposing tariffs on precious metals.
This has led to a significant increase in gold transfers to New York from London and other parts of the world. Transporting gold is not straightforward. The logistics are complex, requiring significant time and security measures.
Deputy Governor Dave Ramsden highlighted these concerns.
Gold transfers rise due to tariffs
He noted that gold’s physical properties add to the logistical and security constraints.
The result has been a multi-week wait for those wishing to remove gold from the Bank. This, in turn, has driven up the price of gold in London. Andrew Bailey, the Bank’s governor, remarked that this shift in the relative price of gold between London and New York has caused some bullion to relocate to New York.
However, it represents less than 2% of the stock. Security and insurance requirements mean that moving gold is a highly coordinated effort. While there are logistical constraints, the governor reassures that the Bank has allocated slots to accommodate all necessary movements.
Adrian Ash, director of research at BullionVault, remarked that the current shortage is primarily manpower and logistics, not the metal itself. He predicts that it will likely be temporary. London continues to be the center of the world’s gold trading and storage network despite short-term bottlenecks.
However, Ash warns that the Bank of England’s role as a gold custodian could be impacted in the longer term due to these logistical challenges and political risks.