Global bullion banks are flying gold into the USA from trading hubs catering to Asian consumers, including Dubai and Hong Kong, to capitalize on the unusually high premium that US gold futures are enjoying over spot prices.
Traditionally, bullion banks transport gold eastward from the West to meet demand from China and India, the world’s two largest consumers, accounting for almost half of global consumption.
High Gold Prices
But alarm about USA import tariffs planned by President Donald Trump has driven Comex futures prices GCcv1 substantially above spot prices XAU= in recent months, creating a lucrative arbitrage opportunity.
“Gold prices are skyrocketing, and in Asia, demand has pretty much disappeared,” said a Singapore-based bullion dealer with a leading bullion supplying bank. Spot gold prices hit a record high on Monday.
“Meanwhile, a sweet opportunity has popped up in the U.S., and naturally, almost every bank is jumping on it — moving gold over for Comex delivery to cash in on the arbitrage,” he said.
COMEX gold inventories GC-STX-COMEX have shot up almost 80% since late November, or 13.8 million troy ounces worth more than $38 billion at current prices, with supplies coming from London, Switzerland, and now Asia-focused hubs.
The premium on Comex futures over spot prices widened again to about $40 on Monday, compared with discounts as high as $15 in India and a discount of around $1 in China.
Demand Surges
The cost of moving gold from Asian hubs to the USA is fractional when compared with prevailing Comex premiums, said a Mumbai-based bullion dealer.
A leading bullion bank even moved gold stored in a customs-free zone in India to the USA last week, he said.
In normal situations, many banks bring gold into India and keep it in customs-free zones, clearing consignments by paying import taxes only after realizing demand. They can move the cargo back overseas without paying taxes.
As retail demand in Asian markets was muted by high prices, bullion banks were even sourcing gold from refiners in Dubai, which usually serve as a major India-supplying hub, to cater to their demand in the US, said a Dubai-based bullion dealer.
“The USA is like a gold magnet right now, pulling in gold from all over the world,” he said.
(with inputs from Reuters)
