London gold market queues up to borrow central bank gold after big shipments to US, sources say

US Physical Therapy

29/01/2025 16:36

* 
      CME gold stocks rose by 12.2 mln oz, or 70% over two
months
    

        * 
      Deliveries to NY tightened London gold market free-float
    

        * 
      London bullion market seeks to borrow gold from central
banks
    

        * 
      Ripple effects felt in other gold hubs after CME
deliveries 
    

  
    By Polina Devitt
       LONDON, Jan 29 (Reuters) - London bullion market players
are racing to borrow gold from central banks, which store
bullion in London, following a surge in gold deliveries to the
United States on speculation of potential import tariffs there,
two sources familiar with the matter said.
    The minimum waiting time to load gold out of the Bank of
England, which stores gold for central banks, has reached four
weeks, one of the sources said. In normal times, the release
time is a few days or a week.
    The BoE declined to comment.
    New U.S. President Donald Trump has not mentioned precious
metals in his tariff plans, but the risk has been enough to
boost gold deliveries to New York as part of the market sought
to hedge its positions on the U.S. COMEX  CME.O  exchange and
part sought to benefit from a jump in the price premium of COMEX
futures  GCcv1  over London spot prices  XAU= .
    London is home to the world's largest over-the-counter gold
trading hub, where market players trade directly with each other
rather than via an exchange.
    "The key with the BoE is that they are not a commercial
vault so not prepared to handle the onslaught of gold borrowing
banks are requesting from the central banks," said Robert
Gottlieb, an industry expert and former head of precious metals
at Koch Supply and Trading.
    The size of so-called Loco London free float - the amount of
gold readily available to the London OTC market stored in London
- has fallen after the jump in supplies to New York.
    Over the last two months, 12.2 million troy ounces of gold
were delivered to COMEX-approved warehouses  GC-STX-COMEX ,
raising stocks there by 70% to 29.8 million ounces, the highest
since August 2022.
    Deliveries to the U.S. left less free float metal in London
vaults - the metal that is not owned by central banks or
holdings of physically-backed gold exchange-traded funds. This
in turn boosted demand from players in London who are ready to
lease their gold and make it available to the OTC market.
    Liquidity challenges in other large trading hubs are less
pronounced than in London, but are being felt globally, said
Alexander Zumpfe, a precious metals trader at Heraeus Metals.
    "The logistical complexities of moving large quantities of
gold, particularly from Europe to the U.S., are amplifying these
stresses. Asia has also seen some knock-on effects, particularly
in markets like Singapore and Hong Kong," Zumpfe added. 

 (Reporting by Polina Devitt. Additional reporting by Pratima
Desai. Editing by Mark Potter)
 ((polina.devitt@thomsonreuters.com; Reuters Messaging:
polina.devitt.thomsonreuters.com@reuters.net))