Gold has attracted investors in uncertain times with some strange consequences.
Source: Investing.com
Let me ask you a question, would you invest in something that had limited practical use, yielded no income and cost money (insurance, storage, etc.) to own?
Well these are the frequently sighted criticisms of buying and holding gold. These are common criticisms of holding physical gold. But in times of global instability, many high-net-worth individuals and companies turn to gold as a form of security, often triggering unexpected market behaviours.
One episode occurred recently, spurred by fears of potential tariffs under President Trump. Ahead of ‘Liberation Day’, there was a mad rush to bring physical gold into the US before it attracted a possible Trump tariff. Usually, gold investment transactions do not involve physically moving bullion. Ownership simply changes hands while the bars remain secured in vaults, often those of the Bank of England, in London. However, the potential tariff made gold delivered to the US more valuable than gold elsewhere, which might face a tariff on later imports.
Sending gold from London to New York sounds simple enough (give or take the security issues and the need to beat the 2 April ‘Liberation Day’ deadline). It was not! London dominates the market in physical gold trading, the buying and selling of bars, whereas the New York Comex market concentrates on derivatives, such as futures. The two different markets have two different standard gold bars. The UK ingot is typically 400-troy ounces, roughly 12.5kg, whereas New York’s standard is a more pocket-friendly size of 1 kg.
This triggered a scramble to a gold meltdown, in more ways than one. As bullion bought in London for delivery in New York was first sent to Switzerland to be melted down and recast in US-sized ingots. In a world of instant electronic trading, this sounds like madness. But this is what happened in the first three months of 2025. The new ‘gold rush’ eventually saw aircraft being used to fly the smaller bars to the US before the feared deadline. Then, on 2 April, in a dramatic twist by Trump, he chose to exempt gold from his tariffs.
His reprieve prompted an initial fall in the price of gold to below $3,000 an ounce before it bounced back to a new record high of over $3,400 by mid-April. This rebound was likely fueled by investors’ preference for gold over the US dollar amid growing economic and geopolitical uncertainty.
We are, indeed, living in extraordinary times.
The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.
Past performance is not a reliable indicator of future performance.
5th June 2025
